A.M. Best Co. has upgraded the financial strength rating to B++ (Good) from B+ (Good) of Elwood Insurance Limited (Hamilton, Bermuda) and assigned an issuer credit rating of “bbb”. The outlook for both ratings is stable.

Elwood’s rating recognizes its excellent capitalization level, history of positive operating performance, conservative reserve practices and effective management of exposures. Over the past five years, return on surplus has averaged 24.5%, while surplus levels have increased at a compound annual growth rate of 29.2% through the accumulation of net profits.

Partially offsetting these positive rating factors is A.M. Best’s concern with the high balance sheet leverage of Elwood’s ultimate parent, Celanese Corp. (NYSE: CE), which could negatively impact the operations of its captive. Additional offsetting rating factors are Elwood’s exposure to some low frequency, high severity hazards in its risk profile, coupled with high limits and high net retentions.

The risk management team of Celanese takes an enterprise-wide approach to managing its risks and utilizing the captive as an integral tool in this process. Elwood’s management also has demonstrated its ability to avoid the mass market of unrelated business. Instead, Elwood utilizes its relationships and those of Celanese to develop a variety of unique and non-correlating accounts, which provide a favorable enhancement to its overall book of business. Nonetheless, Elwood’s long-term growth opportunities primarily depend on Celanese’s business success.

For current Best’s Ratings and independent data on the captive and alternative insurance market, please visit www.ambest.com/captive.

Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.