LONDON--(BUSINESS WIRE)--AM Best has removed from under review with negative implications and affirmed the Financial Strength Ratings of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” of Canopius US Insurance, Inc. (Canopius US) (Wilmington, DE) and Canopius Reinsurance Limited (Canopius Re) (Bermuda). Both entities are wholly owned subsidiaries of Canopius Group Limited (Canopius) (Jersey), the non-operating holding company of the Canopius group of companies. The outlook assigned to these Credit Ratings (ratings) is stable.
The removal of the under review status follows announcements made by Canopius that it entered into a strategic partnership with Samsung Fire & Marine Insurance Co., Ltd. (SFMI) and completed the merger of AmTrust at Lloyd’s business. Subsequently, AM Best has completed its assessment of the impact of these transactions on Canopius’ rating fundamentals.
The ratings reflect Canopius’ balance sheet strength, which AM Best categorises as strong, as well as its adequate operating performance, neutral business profile, and appropriate enterprise risk management. The ratings of Canopius US and Canopius Re benefit from their strategic importance to and integration within the Canopius group.
Canopius’ balance sheet strength is underpinned by risk-adjusted capitalisation that AM Best expects to be maintained at least at a very strong level in the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). Canopius’ risk-adjusted capitalisation is expected to be supported by capital contributions from two new minority investors, SFMI and AmTrust Financial Services, Inc. (AmTrust). These contributions are expected to be sufficient to meet the growth in Canopius’ underwriting risk, from the merger of AmTrust at Lloyd’s business. In addition, Canopius’ balance sheet strength is supported by its move toward a more conservative investment allocation and a reduction in catastrophe exposure over 2018 and 2019.
Canopius’ operating performance in 2018 and 2017 was affected negatively by catastrophe losses, resulting from its relatively high-risk appetite in the past. For the first half of 2019, whilst the overall results were positive, the group reported an underwriting loss due to deterioration of Hurricane Jebi claims and modest reserve strengthening in other areas. However, AM Best expects prospective underwriting performance to be profitable and more stable, as the group has reduced its catastrophe exposure significantly. In addition, the assumed AmTrust at Lloyd’s business is expected to generate positive results. Canopius will not have net exposure to any legacy business from AmTrust, as it assumes only the 2019 year of account, reducing the potential for reserve risk.
Canopius has a well-established business profile, as a (re)insurer in the Lloyd’s market, although it is subject to a high level of competition. AM Best expects the acquisition of AmTrust at Lloyd’s business to further boost Canopius’ profile and improve its economies of scale, with its premium base expected to exceed USD 2 billion in 2020.
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