On Friday, A.M. Best announced that it upped the financial strength rating of Transatlantic Reinsurance Company and its subsidiaries (collectively referred to as TransRe) to “A+” (superior) from the previous level of “A” (excellent).

Explaining the upgrade, the Oldwick, N.J.-based rating agency pointed to TransRe’s strong risk-adjusted capitalization, robust enterprise risk management and consistent operating performance. In addition, Best also flagged two key agreements struck by TransRe—one with Berkshire Hathaway subsidiary General Re to underwrite brokered business for Gen Re, and the other with Berkshire’s National Indemnity and American International Group removing some long-tailed liabilities from TransRe’s books.

Under the terms of the July 2016 agreement between TransRe and General Re, TransRe serves as the exclusive underwriter for U.S. and Canadian broker-sourced treaty business on behalf of General Re.

“While the tangible benefits of the agreement have not yet been realized, the additional capacity is expected to enhance TransRe’s overall competitive position,” A.M. Best said in the ratings announcement, after noting that the upgrade considers TransRe’s well-regarded business profile and its highly diversified book of business.

Also factoring into the upgrade is a deal with AIG, and with Berkshire’s National Indemnity Company and Resolute Management, Inc., commuting historical asbestos and environmental exposures. The A&E exposures “have been a longstanding, albeit modest, drag on overall earnings,” A.M. Best said, referencing the deal announced in December 2015, under which TransRe said it would pay $400 million to eliminate roughly 90 percent of its liabilities for A&E losses occurring in 1986 and prior years.

Although A.M. Best analysts don’t expect TransRe’s return measures to be at the high end of the companies’ peer group going forward, they do expect the reinsurer to continue produce favorable results, supportive of the rating “and with lower volatility relative to peers over the course of the full cycle.”

Transatlantic Holdings Inc. was at one time a publicly traded reinsurer that was majority owned by AIG. Alleghany Corp. ultimately acquired TransRe, taking it private in March 2012

In addition to taking action on the financial strength ratings of the reinsurance operations, A.M. Best upgraded TransRe’s issuer credit ratings to “a-” from “bbb+” along with the issue ratings of Alleghany Corporation and Transatlantic Holdings Inc.

A.M. Best also affirmed the FSRs and ICRs of other Alleghany insurance operations:

  • RSUI Indemnity Company and its reinsured subsidiaries (RSUI), FSR affirmed at A+ and the ICRs at “aa-“
  • Capitol Indemnity Corporation and two subsidiaries, FSR affirmed at “A” and the ICRs at “a”
  • Pacific Compensation Company, FSR affirmed at “A-” and the ICR at “a-“

The outlook of each rating is stable.

Source: A.M. Best