OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of “a+” of MS Frontier Reinsurance Ltd (MS Frontier) (Hamilton, Bermuda). The outlook for both ratings is stable. MS Frontier is a wholly owned subsidiary of Mitsui Sumitomo Insurance Company, Limited (MSI), which is a subsidiary of MS&AD Insurance Group Holdings, Inc. (MS&AD) (both domiciled in Japan).
The ratings reflect MS Frontier’s overall positive operating performance over the past five years taking into account the severe global catastrophe events of 2011. In addition, MS Frontier’s ratings are enhanced by the global presence, financial support and balance sheet strength of MS&AD. MS Frontier maintains an excellent level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The ratings also take into account the company’s improved enterprise risk management practices. MS Frontier continues to be a strategic insurance vehicle, which is designed to be a part of MSI’s optimization of its geographic portfolio, risk diversification and overseas business expansion.
Offsetting risk factors include MS Frontier’s exposure to low frequency, high severity events, which could significantly reduce its capital given its focus on property catastrophe reinsurance. MS Frontier’s management will be challenged with the tasks of controlling its growth in the newly established branch, implementing new “non-catastrophe" underwriting guidelines as well as managing the run off from its Dublin-based subsidiary, Mitsui Sumitomo Reinsurance Limited.
Positive rating actions may result if MS Frontier maintains superior financial performance with lower volatility and solid risk-adjusted surplus levels as it moves through the restructuring.
Negative rating actions may result if MS Frontier’s capital deteriorates, or if the company experiences further severe catastrophe events or decreasing levels of support from MSI.
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. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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