Watford Raise Capital, To Begin Operations
Watford Holdings Ltd. and its wholly-owned subsidiary Watford Re Ltd., a newly-formed Bermuda-based multi-line reinsurer, has raised capital and expects to commence reinsurance operations shortly.
Watford is led by its Chief Executive Officer John Rathgeber, a 30-year reinsurance industry veteran, who was most recently the Vice Chairman of Arch Worldwide Reinsurance Group. Watford Re is licensed as a Class 4 reinsurer by the Bermuda Monetary Authority.
Rating company A.M. Best Co. has assigned a financial strength rating of A- [Excellent] and issuer credit rating [ICR] of “a-” to Watford Re Ltd. The outlook assigned to the ratings is stable.
A statement from the ratings agency said, “The ratings are based on Watford’s strong risk-adjusted capitalization, experienced underwriting led by Arch Underwriters Ltd., a wholly owned subsidiary of Arch Capital Group Ltd., and Watford’s broad-based business plan.
“Partially offsetting these positive rating factors are the start-up nature of the company and the risks associated with a leveraged investment strategy along with competitive conditions in the reinsurance market that may challenge the execution of the business plan.
A.M. Best said they believe that “underwriting risk coupled with the leveraged investment strategy creates an elevated risk profile that could expose Watford on both the asset and liability sides of the balance sheet.
“However, the skilled underwriting of Arch Capital Group Ltd. and the experienced investment acumen of Highbridge Principal Strategies, LLC [HPS], along with cash flows produced by Watford’s credit investment strategy, will help manages these risks.
“In addition, A.M. Best anticipates that Watford’s management will be challenged by competition from established reinsurers as well as other start-up entities and alternative capital. The addition of more capacity to an already overcapitalized reinsurance marketplace could pressure underwriting margins.
“Watford’s assets will be managed by HPS, a subsidiary of Highbridge Capital Management, LLC, a New York-based SEC-registered investment advisor. HPS has approximately $19 billion of assets under management. Watford will own the individual investments and hold the assets on its balance sheet. Watford’s assets will not be comingled with any HPS-managed funds with other investors of HPS.
“Key rating triggers that could result in positive rating actions would be Watford meeting and/or exceeding its business plan. Negative rating actions could occur if Watford fails to execute its business plan over the long term.”
