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AM Best Revises Outlooks to Negative, Affirms Credit Ratings of Spheric Assurance Company, Ltd.

AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of Spheric Assurance Company, Ltd (Spheric) (British Virgin Islands).

These Credit Ratings (ratings) reflect Spheric’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The negative outlooks reflect AM Best´s expectation of continued pressure on the company’s ERM over the short term. While the company continues to execute a viable turnaround strategy, it is facing operational risk in its reporting and accounting.

Spheric has steadily strengthened its capital base by reinvesting its earnings. The strong balance sheet strength assessment also factors in the company’s conservative investment portfolio, mainly integrated by fixed income and equity securities. Despite the company’s reinsurance dependence over the years, Spheric has managed to increase its retention as its expertise in its niche markets sharpens.

The company has shown positive bottom-line results over the years; Spheric’s operating performance has been underpinned by positive technical results, while pursuing new niche opportunities. AM Best expects the company to maintain premium sufficiency levels while implementing its expansion strategy.

AM Best assesses the company’s business profile as limited; Spheric concentrates its efforts in niche markets and the geographic diversification of its premiums and client base is somewhat narrow. The company is based in the British Virgin Islands and fully owned by Global Insurance Group Holding Company, Inc. The largest share of Spheric’s gross premiums written is derived from insuring personal watercraft, while additional premium is generated through kidnap and ransom, personal accidents and property reinsurance.

Spheric’s ERM is considered appropriate, as it is well-integrated into its operations. Despite the company’s embedded internal controls, Spheric faces operational risk as it concentrates various functions in one person, thus a corporate governance factor is considered a key driver behind the revised rating outlook. The company has a sound reinsurance program in place with highly rated reinsurers. Positive rating actions could occur if the company’s corporate governance and internal controls improve and contribute positively to the ERM assessment. Conversely, negative rating actions could take place if a deterioration in its corporate governance continues to impact the company’s ERM assessment.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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