FAIR Oil & Energy Insurance Syndicate (FOEIS) (Bahrain) reported a net profit of $2.3m for 2018, continuing its trend of healthy profit generation over the previous five years (2013-2017), according to its preliminary financial results.
FOEIS’ operating profits are driven principally by the performance of technical operations, augmented by marginal returns from investment activities, said A.M. Best in a report. There was an increase of $1.4m reported in 2017 that in turn was a decline from the $3.1m in 2016. Net earnings declined in 2017 as a result of a single full limit loss, which increased the combined ratio to 98.5% last year compared to 74.4% in 2016.
A.M. Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of FOEIS. The outlook of these credit ratings is stable.
The ratings reflect FOEIS’ balance sheet strength, which the rating agency categorises as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Given the syndicate’s small capital base, prospective risk-adjusted capitalisation is susceptible to volatility, said the agency. The balance sheet strength assessment benefits from a conservative investment portfolio and prudent reserving strategy.
The syndicate has demonstrated its financial flexibility through a revision to its capital strategy in 2016 when it successfully made cash calls to members for all outstanding subscribed units.
FOEIS is one of four reinsurance vehicles formed by the Federation of Afro-Asian Insurers and Reinsurers (FAIR) with a remit to write energy business. The syndicate’s members are drawn from participants of FAIR, who subscribe to FOEIS’ units of capacity. While unique in its legal structure, the syndicate operates like a traditional reinsurer, providing capacity and expertise to its cedants.
Although limited in size, FOEIS benefits from a defendable niche business profile. Members provide the syndicate with good access to energy risks across the Afro-Asian territories, supplemented by business written through the open market across the region. While the syndicate is concentrated heavily by line of business, it benefits from diversification through the geographical spread of its business.
FOEIS is managed by Bahrain-headquartered Trust Re which is known to be a regional expert in this special line of business centring on oil and energy and related business. M