AM Best Affirms Strong Credit Ratings for Ecclesiastical Insurance Office
AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” (Excellent) for Ecclesiastical Insurance Office plc (EIO), a United Kingdom-based insurance company. AM Best also affirmed the Long-Term Issue Credit Rating of “bbb” (Good) on EIO’s GBP 106.5 million, 8.625% non-cumulative irredeemable preference shares.
The outlooks for all of these Credit Ratings are stable.
The latest rating action reflects AM Best’s assessment of EIO’s balance sheet strength as very strong, supported by robust risk-adjusted capitalization and conservative reserving practices. The assessment also considers the company’s adequate operating performance, neutral business profile and appropriate enterprise risk management.
EIO has maintained a specialized position within the United Kingdom insurance market, with a focus on sectors including faith, heritage, charities and education. Its distinctive market position and long-standing relationships within these sectors provide the company with an established platform from which to conduct its insurance operations.
Very Strong Balance Sheet Strength
A key factor supporting EIO’s ratings is its balance sheet strength, which AM Best assesses as very strong.
The assessment is underpinned by risk-adjusted capitalization that AM Best expects to remain comfortably at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR).
BCAR is an important component of AM Best’s assessment of an insurer’s ability to withstand financial risks relative to its capital resources. Maintaining capitalization at the strongest level provides an important financial cushion against unexpected losses and other sources of volatility.
For EIO, the expectation that risk-adjusted capitalization will remain comfortably within the strongest category provides support for its current financial strength rating.
The company’s capital position is also supported by its approach to reserving. Conservative reserving practices provide additional support for the balance sheet strength assessment, although EIO remains exposed to certain insurance classes that have experienced volatility in recent years.
The combination of strong capitalization and conservative reserves provides EIO with a solid foundation for managing its insurance obligations.
Conservative Reserving Practices
Reserve management is an important consideration for property and casualty insurers because claims can develop over extended periods.
EIO’s conservative reserving practices contribute positively to AM Best’s assessment of its balance sheet strength. Maintaining appropriate reserves helps ensure that the company has sufficient resources to meet future claims and related expenses.
However, certain classes of business written by EIO have exhibited volatility in recent years. This creates potential uncertainty around future claims experience and reinforces the importance of continued underwriting discipline and prudent reserve management.
Despite these exposures, AM Best expects EIO’s capital position to remain sufficiently strong to support its current rating profile.
The company’s ability to maintain appropriate reserves while managing business lines with differing risk characteristics will remain an important element of its financial management.
Exposure to Financial Market Volatility
EIO maintains a relatively high allocation to equity investments.
Equity investments can provide insurers with opportunities for attractive long-term investment returns, but they can also introduce greater sensitivity to changes in financial markets.
Market declines can reduce investment values and, depending on the scale and timing of those movements, place pressure on an insurer’s capital position.
For EIO, the relatively high allocation to equities increases the sensitivity of risk-adjusted capitalization to financial market volatility. AM Best nevertheless expects the company’s capital buffers to remain sufficient to absorb financial market shocks.
This provides an important balance in the rating assessment. While EIO has meaningful exposure to investment market movements, its capital position is expected to provide adequate protection against periods of financial market stress.
The company’s investment portfolio will therefore remain an important component of its overall financial performance and capital profile.
Consistent History of Profitable Operations
EIO has demonstrated a track record of adequate operating performance.
The company generated post-tax profits in nine of the 10 years between 2016 and 2025. This history demonstrates an ability to produce positive earnings over an extended period despite changes in underwriting conditions and financial markets.
Long-term profitability is important for insurers because earnings can contribute to capital generation and help strengthen the balance sheet organically.
EIO’s performance has benefited from active portfolio management, which has supported robust underwriting results in recent years.
Portfolio management allows an insurer to assess the performance and risk characteristics of different business lines and adjust its underwriting strategy as market conditions change.
For EIO, these efforts have contributed to an overall operating profile that AM Best considers adequate.
2025 Underwriting Performance
In 2025, EIO reported a net/net combined ratio of 96.9%, according to AM Best’s calculations.
The result represented a deterioration of 1.3 percentage points compared with 2024. The change was affected by a one-off cost incurred during the year.
The combined ratio is a key measure of underwriting performance for property/casualty insurers. A ratio below 100% generally indicates that an insurer generated an underwriting profit before considering investment income, while a ratio above 100% indicates an underwriting loss.
EIO’s 96.9% ratio therefore indicates that the company remained profitable at the underwriting level in 2025 despite the deterioration from the previous year.
The one-off cost affected the year’s result, meaning that the change in the combined ratio should be considered in the context of that specific expense.
Continued underwriting discipline and active portfolio management will be important as EIO seeks to maintain sustainable underwriting performance.
Investment Returns Remain Variable
Investment income has also contributed to EIO’s overall profitability over the longer term.
However, investment returns have experienced significant volatility in recent years as financial markets have fluctuated.
Between 2021 and 2025, EIO’s net investment return ratio, including gains, ranged from negative 5.6% to positive 9.2%.
The broad range illustrates the impact that financial market conditions can have on the company’s investment performance.
Periods of strong market performance can generate meaningful investment gains, while unfavorable conditions can result in investment losses and reduce reported profitability.
Despite this volatility, investment returns have positively contributed to EIO’s overall profitability over the longer term.
The company’s investment strategy therefore remains an important component of its financial profile, particularly given its relatively high allocation to equity investments.
AM Best expects EIO’s capital buffers to provide sufficient capacity to absorb financial market shocks, reducing the potential effect of investment volatility on its overall balance sheet strength.
A Distinctive Position in the UK Insurance Market
EIO has a well-established and distinctive position within the United Kingdom.
The company provides insurance products and risk management services to organizations operating in the faith, heritage, charity and educational sectors.
These markets represent specialized areas of insurance that require an understanding of the particular risks associated with institutions, organizations and properties in these sectors.
EIO’s long-standing presence has helped establish relationships and expertise within these markets.
Its specialized business profile also differentiates the company from insurers that operate primarily across broader personal or commercial insurance markets.
The company’s established position contributes to AM Best’s assessment of its business profile as neutral.
Geographic Diversification
Although most of EIO’s reported insurance services revenue is generated in the United Kingdom, the company has some geographic diversification through subsidiaries in Australia, Canada and Ireland.
International operations can provide an additional source of diversification by reducing reliance on a single geographic market.
However, the United Kingdom remains the company’s principal market, meaning its overall performance continues to be influenced substantially by conditions in the UK insurance industry and the sectors it serves.
The presence of operations in Australia, Canada and Ireland nevertheless gives EIO an international footprint and provides additional opportunities for business development.
Expectations for Future Revenue Growth
AM Best expects EIO’s insurance services revenue to experience modest growth in the coming years.
The expected growth is anticipated to be supported by prudent underwriting practices.
Rather than pursuing growth without regard to risk, the company’s approach is expected to remain focused on maintaining appropriate underwriting standards and managing its portfolio carefully.
This strategy is consistent with EIO’s established approach to portfolio management and its focus on maintaining financial strength.
Modest revenue growth, combined with disciplined underwriting, could provide a foundation for continued stable operations while limiting the potential risks associated with aggressive expansion.
Enterprise Risk Management
EIO’s enterprise risk management (ERM) is assessed as appropriate.
Effective ERM is particularly important for an insurer with exposure to multiple sources of volatility, including underwriting risks, reserve uncertainty, equity-market movements and geographic exposures.
A comprehensive risk management framework helps an insurer identify, measure and manage these risks while aligning them with its capital resources and business objectives.
AM Best’s assessment of EIO’s ERM as appropriate supports the company’s overall rating profile.
Continued attention to risk management will remain important as EIO manages its specialized insurance portfolio and investment exposures.
The stable outlooks assigned to EIO’s ratings reflect AM Best’s expectation that the company’s overall financial profile will remain broadly consistent with its current assessment.
The very strong balance sheet strength assessment is supported by expectations for risk-adjusted capitalization to remain comfortably at the strongest level.
The outlook also takes into consideration EIO’s established market position, history of adequate operating performance and active portfolio management.
At the same time, the company faces risks associated with volatile insurance classes and financial market movements.
Its relatively high equity allocation creates additional sensitivity to market conditions, while fluctuations in underwriting performance can affect earnings.
Nevertheless, AM Best expects EIO’s capital buffers and financial management practices to provide sufficient support against these risks.
Continued Focus on Financial Strength
The affirmation of EIO’s ratings reflects a combination of strong capitalization, conservative reserving, established market presence and a history of adequate profitability.
The company has generated post-tax profits in nine of the last 10 years, while active portfolio management has supported underwriting performance.
Although the 2025 combined ratio deteriorated from the previous year, EIO remained underwriting profitable, reporting a net/net combined ratio of 96.9%.
Investment returns have been more volatile, ranging from -5.6% to 9.2% over the five years through 2025, but have contributed positively to profitability over the longer term.
EIO’s specialized position in the faith, heritage, charity and education sectors remains a defining characteristic of its business profile. Its subsidiaries in Australia, Canada and Ireland provide additional geographic diversification, although the United Kingdom continues to account for the majority of insurance services revenue.
Looking ahead, AM Best expects modest revenue growth supported by prudent underwriting practices. The stable outlook indicates that the rating agency expects EIO to maintain its very strong balance sheet strength and adequate operating performance while managing its exposure to underwriting and financial market volatility.
Overall, the latest affirmation maintains EIO’s A (Excellent) Financial Strength Rating, “a” (Excellent) Long-Term Issuer Credit Rating and “bbb” (Good) rating on its preference shares, with stable outlooks across the ratings.
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