Positive Outlook For Third Point Re

A.M. Best Co. today [Jan. 9] assigned a financial strength rating of A- [Excellent] and issuer credit rating of “a-” to Bermuda’s Third Point Reinsurance Ltd. [TP Re].

The outlook assigned to both ratings is stable.

The ratings of TP Re are based on its excellent risk-adjusted capitalisation, experienced management team and prudent business plan.

International ratings agency Best said partially off-setting these positive factors are the start-up nature of the company, the greater investment risk associated with an alternative investment strategy, as well as the increased competition in the reinsurance marketplace that may challenge some of the tenets of TP Re’s business plan.

A.M. Best is concerned that there is a possibility that TP Re could be exposed to a confluence of events that will test its capital strength.

Due to the underwriting risk coupled with the asset risk present in an alternative investment strategy, there could be a duplicative result that could adversely affect risk-adjusted capital.

However, TP Re’s low underwriting leverage, experienced underwriting team, partially hedged nature of the portfolio along with its 16 year successful investment track record help mitigate these concerns.

The assets of TP Re will be managed by Third Point LLC, a New York-based , US Security & Exchange Commission-registered investment manager with over $7.6 billion of assets under management.

Third Point LLC founder Daniel Loeb [pictured] started the Bermuda reinsurance company in September, 2011 as a way to raise capital for his hedge fund that isn’t subject to client redemptions. Reinsurers, which help insurers shoulder risk, earn premiums that they invest to make a profit..

Third Point hired industry veteran John Berger as chief investment officer of the Bermuda reinsurance operation, saying in a letter to clients: “We believe that the combination of Third Point’s longstanding exceptional asset management returns, Mr. Berger’s standout underwriting track record, and a reinsurance market that may improve following multiple events in the past 12 months make it a promising time to launch Third Point Re.”

TP Re’s assets will be in a separate portfolio within Third Point LLC and will not be comingled with other investors at Third Point LLC.

In addition, A.M. Best anticipates that TP Re’s management will be challenged by competition from established reinsurers as well as other start-up entities.

The addition of more capacity into an already overcapitalized reinsurance marketplace could pressure underwriting margins.

Key rating triggers that could result in positive rating actions would be TP Re meeting and/or exceeding its business plan over the long term.

Meanwhile, key rating triggers that could result in negative rating actions would be TP Re not executing its business plan over the long term.

#BermudaBusiness #BermudaInsurance #ThirdPointReinsurance

Category: All, Business