LONDON--(BUSINESS WIRE)--A.M. Best has assigned a financial strength rating of A- (Excellent) and an issuer credit rating of “a-” to Humboldt Re Limited (Humboldt Re) (Guernsey). The outlook assigned to both ratings is stable.
The ratings reflect Humboldt Re’s diversified projected underwriting exposure within the natural catastrophe spectrum, expected strong risk-adjusted capitalisation, a risk management framework adequate to its intended business profile and its experienced management. Offsetting rating factors include the challenges related to the immediate execution of its proposed business plan in current market conditions.
In A.M. Best’s view, moderate projected underwriting leverage and a flexible retrocession program with good credit quality are expected to support Humboldt Re’s risk-adjusted capitalisation in the medium term.
The company is a privately owned start-up entity based in Guernsey that provides mainly short-tail property and specialty lines reinsurance. With an initial capital outlay of CHF 500 million, Humboldt Re intends to build a portfolio of approximately CHF 140 million gross written premiums, with globally diversified reinsurance exposures focused on property catastrophe. The entity will use the distribution reach of a leading insurance-linked securities originator, currently with assets under management of approximately USD 6.5 billion, which in A.M. Best’s view, mitigates the inherent execution risk of a start-up reinsurance company.
Humboldt Re’s board of directors is largely composed of individuals with experience in reinsurance. Additionally, the proposed investment strategy demonstrates, in A.M. Best’s view, a conservative approach toward asset allocation, mainly focused on direct exposures to highly liquid fixed income paper with excellent credit ratings.
Underwriting and reserving are outsourced to market-leading providers and Humboldt Re also has partnered with third parties for its management function. The company’s assigned management team has demonstrated a successful track record in a similar start-up company that operates in what constitutes Humboldt Re’s core business. The team and parties involved have a good record of commitment to an organic culture of enterprise risk management.
Current headwinds in the global reinsurance market present challenges to the execution of Humboldt Re’s proposed business plan. Although the company’s medium-term revenue plans are realistic, underwriting margins and investment yields continue compressing, which creates potential strain on profitability that can ultimately place a drag on financial strength.
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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