OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has assigned a Financial Strength Rating of A (Excellent) and a Long-Term Issuer Credit Rating of “a+” to Vermeer Reinsurance Ltd. (Vermeer) (Bermuda). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Vermeer’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and very strong enterprise risk management (ERM).
Vermeer is a joint venture between RenaissanceRe Holdings Ltd. (RenaissanceRe) [NYSE:RNR] and Dutch pension fund manager PGGM to provide new capacity predominantly for risk-remote layers in the U.S. property catastrophe market.
PGGM is a leading Dutch pension fund service provider with € 215 billion of assets under management. PGGM has been investing in insurance and CAT bonds since 2006 and is currently one of the largest end-investors in insurance-linked investments.
Vermeer will initially be capitalized with $600 million of funding from PGGM, with the option for another $400 million investment to pursue growth opportunities in 2019. Vermeer will be managed solely by Renaissance Underwriting Managers, Ltd. (RUM) and is expected to be consolidated into RenaissanceRe’s financial statements. In addition to board control, RenaissanceRe owns 100% of the voting shares, and RUM will manage Vermeer’s business including underwriting, pricing, risk selection, reserves, investments, claims, etc. Vermeer’s underwriting portfolio will be aligned with RenaissanceRe’s, as RenaissanceRe participates on every risk alongside Vermeer.
The ratings assigned to Vermeer also reflect the strength and depth of RenaissanceRe’s management team and the ability of the company to deliver strong long-term profitability over the course of the (re)insurance cycle. RenaissanceRe is recognized widely for its leadership in ERM and as a pioneer in third-party capital management. RenaissanceRe remains a leader in the property catastrophe market, and maintains a strong reputation in evaluating risk and effectively deploying capital, and as a result, Vermeer should benefit from this expertise.
Partially offsetting these strengths is Vermeer’s start-up status, its ability to be accepted in the market and its expected exposure to high severity losses associated with catastrophe events. In addition, the global reinsurance market, and specifically the property catastrophe segment, has experienced overcapacity and pricing pressures over the past few years that in turn has placed pressure on overall returns.
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