AM Best Assigns Ratings To Ascot Reinsurance
A.M. Best has assigned a Financial Strength Rating of A [Excellent] and a Long-Term Issuer Credit Rating of “a” to Ascot Reinsurance Company Limited [Ascot Re] [Bermuda]. The outlook assigned to these Credit Ratings [ratings] is stable.
A statement from the ratings agency said, “The ratings reflect the company’s balance sheet strength, which is assessed as very strong by A.M. Best, adequate operating performance, limited business profile and appropriate enterprise risk management [ERM], as well as rating enhancement from its parent, Ascot Group Limited [Ascot Group].
“Ascot Re received its Class 3B insurance licence in Bermuda in November 2017. According to the company’s business plan, in 2018, it will start writing quota-share reinsurance for Lloyd’s Syndicate 1414 [Syndicate 1414], which is managed by Ascot Underwriting Limited. A.M. Best expects Ascot Re to also write non-affiliated business, the size of which will depend on market conditions.
“Based on business plans shared with A.M. Best, Ascot Re’s risk-adjusted capitalisation is projected to be at the strongest level as measured by the Best’s Capital Adequacy Ratio [BCAR]. The company’s balance sheet strength is further supported by good financial flexibility, as well as a risk-averse asset allocation policy and excellent liquidity. Partially offsetting these rating factors is the company’s relatively high exposure to catastrophic loss events. Stemming from this is also a moderate level of third-party reinsurance dependence. Consequently, A.M. Best has assessed the company’s overall balance sheet strength as very strong.
“Ascot Re’s business mix is expected to be similar to that of Syndicate 1414, dominated by property and reinsurance and characterised by a significant concentration in U.S. catastrophe risks. In addition to this, A.M. Best views the markets that Ascot Re will operate in as highly competitive, which could adversely affect the company’s ability to grow profitably. These risks are partially mitigated by Ascot Group’s experienced and stable management team, as well as its strong underwriting discipline and expertise, demonstrated by Syndicate 1414’s track record.
“The company’s operating performance is assessed as adequate based on expected results. Final performance will be subject to the amount of non-affiliated business Ascot Re writes. The part of the book that constitutes intragroup business will mirror Syndicate 1414’s performance. Syndicate 1414 has a strong track record of profitability, outperforming the Lloyd’s market in 14 out of the past 15 years [2002-2016, as measured by combined ratios], although this positive gap has shrunk in recent years. Due to projected exposure to catastrophic events, A.M. Best expects the company’s profitability to be volatile over the long term.
“Ascot Re’s ERM is assessed as appropriate, based on the company’s projected size and risk profile. A.M. Best expects Ascot Re to benefit from the established ERM capabilities of its parent, Ascot Group.
“Ascot Re benefits from rating enhancement from Ascot Group, as the company is viewed as strategically important for the group as a potential expansion platform in Bermuda’s reinsurance market. The rating enhancement also factors in the support from Ascot Re’s ultimate parent, Canada Pension Plan Investment Board, due to the latter’s financial security, long-term investment horizon and its commitment to investing in Ascot Group, demonstrated by several capital injections to date.“
