A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of “a” of Beazley Insurance Company, Inc. (BICI) (Farmington, CT), a subsidiary of Beazley plc (Beazley) [LSE:BEZ]. The outlook for both ratings is stable.

The ratings reflect BICI’s supportive risk-adjusted capitalization, its ability to gain broker market acceptance and scale in the specialty admitted market since its formation in 2005, and the benefits from being part of Beazley plc. The ratings also consider the complementary role that BICI plays for the Beazley group of insurers as a specialty admitted carrier in the U.S. and the explicit support provided by the extensive quota share reinsurance through Beazley's Lloyd's Syndicate 3623. The ratings also reflect management's underwriting discipline, its willingness to walk away from business that does not meet its return hurdles and the favorable track record of Beazley plc, which has been actively writing U.S. sourced business since its formation in 1986.

These strengths are offset by the inherent challenges of being a relatively new market in the U.S., ongoing competitive pressures in the commercial specialty lines, the ability to successfully scale its new accident & health business to offset the expenses related to this initiative, and the execution risk related to new business growth and new relationships. Certain potential legislative changes related to the Affordable Care Act could adversely impact BICI's ability to attract business in the accident & health line. Despite the challenges, BICI has been successful in garnering relationships with a number of regional brokers, which has allowed the company to scale its book to nearly $200 million in 2014. BICI also maintains a quality balance sheet, which is reflective of Beazley's conservative investment and reserving philosophies. The ratings also consider management's expressed intention to adhere to strict underwriting fundamentals while prudently managing its capital.

The formation of BICI was part of Beazley's expansion strategy, which includes building a significant local U.S.-based specialty admitted insurer focused on small to mid-size enterprises (SME) markets. BICI targets low hazard specialty classes, with a focus on professional liability (covering architects and engineers, technology and media companies, as well as healthcare providers), accident & health, and builder's risk property. BICI's role in the U.S. complements Beazley's U.S.-sourced surplus lines business written through its Lloyd's syndicates. Having an admitted operation in the United States ostensibly allows management to garner broader access to the U.S. commercial insurance market and access to the smaller SME market, to which it would otherwise not have access. Going forward, A.M. Best expects BICI to continue utilizing Beazley's established underwriting strategies and principles as it advances its position as a leading specialty insurer in the U.S.

Factors that could lead to positive rating actions include further establishing itself as a specialty admitted insurer in the U.S., sustained profitability in its core business, the continuation of favorable reserve development and a level of risk-adjusted capitalization that remains supportive. Factors that may lead to a negative rating action include any material declines in risk-adjusted capitalization, any sudden and material changes in business strategy, a weakening in operating results, adverse reserve development and/or any major business disruption related to its distribution partners. Furthermore, any upward or downward movement in the rating of the Lloyd's market, given its implications on Lloyd's 3623, or a perceived lessening of support provided by Beazley would also influence BICI's rating negatively.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

• Rating Lloyd's Syndicates

• Rating Members of Insurance Groups

• Risk Management and the Rating Process for Insurance Companies

• Understanding BCAR for Property/Casualty Insurers

This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best’s Ratings & Criteria Center.

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