A.M. Best announced Thursday that the rating agency has upgraded the financial strength rating (FSR) of Greenlight Reinsurance Ireland, Limited (Ireland) to “A “(excellent) from “A-“(excellent).
The rating action was announced in conjunction with Best’s affirmation of the FSR of A (excellent) of Greenlight Reinsurance, Ltd. (Greenlight Re).
The Oldwick, N.J.-based rating agency set the issuer credit rating of both units to “a” as well.
The move came a few days after General Reinsurance’s CEO Tad Montross publicly criticized the rating agency for supporting the continued interest of hedge funds in reinsurance with good financial strength ratings at the PCI Annual Conference in Scottsdale, Ariz. on Tuesday. A.M. Best has rated five hedge-fund reinsurers, and Greenlight has the highest rating among the group. (The others are rated A-minus.)
Greenlight Reinsurance Ireland, Ltd.’s rating is based on its strategic and financial importance to Greenlight Re as a subsidiary and is fully integrated into its parent company’s operations, Best said in the rating announcement on Thursday. Additionally, Greenlight Reinsurance Ireland Ltd. receives support in the form of reinsurance contracts and stop loss agreements from Greenlight Re.
As for the ratings of Greenlight Re, those are based on its excellent risk-adjusted capitalization, experienced management team and the disciplined implementation of its overall business strategy, the rating agency said. Best noted that the ratings also recognize Greenlight Re’s “exceptional enterprise risk management as it aggressively manages risks on both sides of the balance sheet.”
Partially offsetting the strengths are partially offset are challenges Greenlight Re faces writing profitable business in a market with increased capacity and further competition from new reinsurance companies with a similar alternative investment strategy, Best acknowledged, also highlighting concerns of the “the leverage resulting from an investment portfolio that is primarily composed of publicly traded equity securities.”
The latter concern is mitigated some by the fact that Greenlight Re’s investment portfolio has been performing well, the rating agency announcement said.
On the reinsurance underwriting side, Best noted that the reinsurer has added new business “using a partnership-oriented approach to underwriting,” allowing Greenlight Re to focus on a small number of large relationships. This enables pricing and structuring on a deal-by-deal basis, Best said.
Greenlight Re has had good underwriting results to date, and its large surplus base supports the expected growth in premium volume, according to Best.
Source: A.M. Best