Rating boost reflects strong management and strategy

Rating agency Standard & Poor’s (S&P) has upgraded the insurance financial strength and counterparty credit ratings of Arch Capital Group’s insurance and reinsurance subsidiaries to A+ from A. The agency has also upgraded the group’s counterparty credit rating to A- from BBB+.

The outlook is stable, reflecting S&P’s expectation that it will not change the rating in the next two years.

S&P said it had upgraded the firm because of its strong management and well-conceived corporate strategy. The agency said that Arch’s senior management team had executed a consistent strategy based on active cycle management, strong underwriting discipline and strong enterprise risk management. It added that the upgrade also reflected the fact that Arch has a record of posting underwriting and operating results that are better and less volatile than some other Bermuda-based (re)insurance companies.

However, S&P also said that potential pricing and reserving risks relating to the group’s large proportion of long-tail casualty business partially offset the positive factors. It added that Arch’s moderately changing business mix could carry additional pricing and reserving risk.