Re-launching Folgate Insurance assigned B rating by AM Best
AM Best has assigned a Financial Strength Rating (FSR) of B (Fair) and a Long-Term Issuer Credit Rating (Long-Term ICR) of “bb+” to UK-based Folgate Insurance Company. The outlook assigned to these Credit Ratings (ratings) is stable.
Folgate will re-start underwriting business in January 2019 after having received approval from the Prudential Regulation Authority (PRA) for writing primary insurance and reinsurance business.
Folgate has partnered with re/insurer MS Amlin to underwrite its business for 2019.
All the business written through Folgate will be underwritten by managing agent APC Underwriting, in a similar setup to a Lloyd’s syndicate. Folgate was acquired by APC in 2014 after the UK insurer was put into run-off by its former owner Towergate in 2002.
The ratings reflect Folgate’s balance sheet strength, which AM Best categorises as adequate, as well as its adequate operating performance, very limited business profile and appropriate enterprise risk management.
Folgate was acquired by its parent, Anglo London Limited (ALL), in 2014, and re-commenced active underwriting in September 2015, writing quota-share reinsurance for business sourced by an affiliated company, Anglo Pacific Consultants (APC). APC is a managing general agent specialising in commercial lines insurance for small and medium-sized businesses. In 2018, Folgate received an insurance licence and, as part of its new business model.
Folgate will accept 30 percent of APC’s UK risks, with the remainder placed with the syndicate. The insurer expects gross written premiums of approximately £8 million in 2019.
Folgate’s balance sheet strength is underpinned by projected risk-adjusted capitalisation at the very strong level, AM Best said.
The impact from ALL on balance sheet strength is assessed as negative, due to its inadequate consolidated BCAR scores, high financial leverage and limited financial flexibility, AM Best said. In addition, Folgate’s risk-adjusted capitalisation is exposed to potential volatility in stressed scenarios, due to its small capital base, the agency added.
AM Best expects the insurer’s underwriting portfolio to be highly concentrated by product and geography, dominated by UK commercial lines insurance. In addition, AM Best views Folgate’s position in the competitive UK market as vulnerable and highly dependent on third parties. This is partly mitigated by APC’s underwriting expertise and existing broker relationships, which are expected to benefit Folgate’s business profile.
Based on the performance of the business underwritten by APC, AM Best expects Folgate’s underwriting results to be positive.
Folgate will be managed by APC, whose commissions will make up most of the insurer’s operational expenses. Operating performance is expected to benefit from modest investment income, AM Best said.
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