AM Best Affirms Credit Ratings Of Brit Re
AM Best has affirmed the Financial Strength Rating of A [Excellent] and the Long-Term Issuer Credit Rating of “a” of Brit Reinsurance [Bermuda] Limited [Brit Re] [Bermuda]. The outlook of these Credit Ratings [ratings] is stable.
A statement from the ratings agency said, “The ratings reflect Brit Re’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management [ERM]. The ratings also benefit from the implicit and explicit support of its immediate parent, Brit Limited [Brit], and its ultimate parent, Fairfax Financial Holdings Limited [Fairfax].
“Brit Re, first incorporated in Gibraltar in 2007 and re-domiciled to Bermuda in November 2017, acts primarily as an internal reinsurer for its affiliates, Syndicate 2987 and Brit Underwriting Limited. In 2020, Brit Re began writing casualty treaty reinsurance, as well as fronting for its affiliate’s ILS platform, Sussex. Brit Re’s very strong balance sheet strength is supported by historically profitable underwriting results and manageable premium growth. The majority of the company’s premium is derived from a quota share contract with its affiliate, Syndicate 2987. Liquidity measures are sound and supported by relatively short-term holdings, predominantly high quality fixed income securities and cash. Best’s Capital Adequacy Ratio [BCAR] levels are moderated somewhat by catastrophe exposure and limited fungibility of its invested assets. A significant amount of assets is collateral for a stop-loss contract written to provide Funds at Lloyd’s [FAL] for an affiliate.
“The company benefits from being part of the Fairfax group of companies in that Fairfax maintains favorable financial flexibility, a strong liquidity position and a track record of supporting its [re]insurance subsidiaries.
“Brit Re maintains the strongest level of risk-adjusted capitalization, as measured by BCAR; however, due to the volatility of its results, risk-adjusted capitalization is likely to remain volatile, keeping the balance sheet assessment at very strong.
“AM Best assesses Brit Re’s operating performance as adequate, largely based on the performance of its all-lines quota share on business written by Brit’s Syndicate 2987, of which Brit Re assumes a 20% share. The syndicate has obtained rate improvement over the past few years; however, major catastrophe losses and competition on its commercial [re]insurance have dampened results in the recent past. The variability of the results of the syndicate business has been offset by the profitability of the FAL stop-loss contract. Underwriting performance also benefits from Brit Re’s very low expense structure. Total investment returns have been variable over the past five years, with unrealized gains and losses impacting the company’s longer-term value-oriented equity portfolio.
“The business profile is assessed as limited given the company’s concentrated business production. ERM practices are appropriate, given the governance structure in place.
“Rating enhancement is based on the implicit and explicit support Brit Re receives from its parent, in the form of business distribution, and overall operational integration.”
