OLDWICK, N.J.--()--A.M. Best Co. has affirmed the financial strength rating of A++ (Superior) and issuer credit rating of “aa+” of Tokio Millennium Re Ltd. (TMR) (Bermuda). The outlook for both ratings is stable.
“Risk Management and the Rating Process for Insurance Companies”
TMR is a wholly owned subsidiary of Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF), which is the main trading subsidiary of Tokio Marine Holdings, Inc. (Tokio Marine Group). Both companies are domiciled in Tokyo, Japan.
The ratings reflect TMR's superior financial strength, favorable operating performance over the last several years and its prudent risk management practices. In addition, the ratings are enhanced by the implicit and explicit support provided by TMNF. The ratings also consider TMR's strategic importance to Tokio Marine Group's initiatives to geographically diversify its catastrophe risks as well as enhance its enterprise risk management function.
Tokio Marine Group has unified its global reinsurance brand under TMR over the past few years. TMR benefits from the global recognition and balance sheet strength of TMNF. TMR predominately writes property catastrophe and specialty reinsurance and has been slowly expanding into casualty reinsurance since mid-2011 to diversify its book of business. TMR continues to be a leader in transforming and transferring reinsurance risk to the capital markets, through its new entities Shima Re and Tokio Solution Management.
TMR has a scientific and quantitative focus and looks to take on risk that it can identify with and model with a high degree of comfort. Property catastrophe modeling is done by utilizing both commercial models and proprietary models. This multi- model allows TMR to be more competitive or selective on risks. TMR also maintains a conservative investment portfolio.
Partially offsetting these positive rating factors is TMR's exposure to low frequency, high severity catastrophic events, as evidenced by the New Zealand earthquakes. These losses significantly impacted TMR's financial performance in 2011; however, the company remains well capitalized and well positioned to take advantage of improving property catastrophe rates in the global marketplace.
Positive rating actions may result over the next several years if TMR exhibits consistency in annual earnings and retained earnings growth, higher surplus levels and/or further strategic integration from TMNF. Negative rating actions could occur if the company’s operating performance is consistently below the market by a significant margin over the next several years, and/or there is capital deterioration due to poor investment performance.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world.
For current Best’s Ratings and independent data on the captive and alternative insurance market, please visit www.ambest.com/captive.
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 utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Rating Members of Insurance Groups”; “Evaluating Country Risk”; “Catastrophe Analysis in A.M. Best Ratings”; and “A.M. Best’s Perspective on Operating Leverage.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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