A.M. Best Assigns Ratings To PaCRe Ltd.
A.M. Best Co. today [Apr. 9] assigned a financial strength rating of A- [Excellent] and issuer credit rating of “a-” to newly-formed Bermuda re/insurer PaCRe Ltd.
The agency said the outlook assigned to both ratings is stable.
The ratings of PacRe are based on its excellent risk-adjusted capitalization, experienced underwriting led by Validus Reinsurance, Ltd. and what the ratings agency described as “aprudent business plan.”
Partially offsetting these positive rating factors are the start-up nature of the company, greater investment risk associated with an alternative investment strategy and the increased competition in the reinsurance marketplace that will challenge the basis of the business plan.
A.M. Best analysts said they have concerns about the possibility of PacRe being exposed to both an asset event along with an underwriting event that could have an adverse effect on risk-adjusted capital.
However, PacRe’s low underwriting leverage, coupled with the strength of Validus Re performing all of the underwriting, and Paulson & Co. Inc.’s 18-year successful investment track record help mitigate these concerns.
PacRe’s assets will be managed by Paulson & Co. Inc., a New York- based SEC-registered multi-strategy event arbitrage investment advisor founded in 1994 by John Paulson.
In addition, A.M. Best anticipates that PacRe will be challenged by already established reinsurers as well as other alternative investment reinsurers entering the market.
The addition of more capacity into an already overcapitalized reinsurance marketplace could pressure underwriting margins.
Key rating triggers that could result in positive ratings actions would be PacRe meeting and/or exceeding its business plan over the long term. Conversely, negative rating actions could result if PacRe did not execute its business plan over the long term.
