LONDON--()--A.M. Best Europe – Ratings Services Limited has affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit ratings (ICR) of “a-” of Torus Insurance (Bermuda) Limited (Torus Bermuda) (Bermuda), Torus Insurance (UK) Limited (Torus UK) (United Kingdom) and Torus Insurance (Europe) AG (Torus Europe) (Lichtenstein). A.M. Best has also affirmed the ICR of “bbb-” of the group’s ultimate parent holding company, Torus Insurance Holdings Limited (Torus) (Bermuda).
“Risk Management and the Rating Process for Insurance Companies”
In addition, A.M. Best Co. has affirmed the FSR of A- (Excellent) and ICR of “a-” of Torus Specialty Insurance Company (Torus Specialty) and Torus National Insurance Company (Torus National) (both domiciled in Wilmington, DE). The outlook for all ratings remains stable.
The ratings reflect A.M. Best’s expectation that risk-adjusted capitalisation will remain strong both on a consolidated basis and for each operating company within the Torus group. Torus Bermuda operates as the recipient of the majority of the group’s risk through a 65% quota share and an aggregate stop loss of Torus UK. In turn, Torus UK provides the same cover to Torus Specialty and Torus National. Torus Bermuda also provides reinsurance support to Torus Europe through a 95% quota share arrangement.
In 2012, risk-adjusted capitalisation was strengthened by the issue of USD 80 million of preference shares to existing investors and to a subsidiary of Berkshire Hathaway Inc., as well as the purchase of additional reinsurance protection. Together, these actions offset the negative effect of 2011’s catastrophe losses on the group’s risk-adjusted capitalisation.
Consolidated financial results have been weak, demonstrated by retained losses between 2008 and 2011 of USD 144 million. The group has made substantial investments in global infrastructure over this period, and in 2011 performance was affected by catastrophe losses on its reinsurance treaty business. Torus has reduced its exposure to catastrophe risk, a process started in 2011, through divestment of business and the purchase of additional reinsurance protection, and this should moderate prospective earnings volatility. However, delivering overall technical profitability will remain challenging given the strong competition from established insurers in Torus’ main business lines. In addition, interest payments on the newly issued preference shares will reduce future retained earnings.
Since its launch in 2008, Torus has built up a significant market presence through a combination of acquisitions of teams and businesses and organic growth. As a result, Torus now writes a well-diversified specialist portfolio with gross premiums of approximately USD 1 billion. Business is written worldwide from operations in London, Bermuda, the United States and continental Europe.
Positive rating actions are unlikely in the near future for the Torus group of companies. Deterioration in risk-adjusted capitalisation and continued financial underperformance would put negative pressure on the ratings.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilised include: “Understanding BCAR For Property/Casualty Insurers”; “Understanding Universal BCAR”; “Catastrophe Analysis in A.M. Best Ratings”; “Rating Members of Insurance Groups”; “Rating New Company Formations”; and “Risk Management and the Rating Process for Insurance Companies”. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
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