LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” of StarStone Insurance Bermuda Limited (StarStone) (Bermuda) and its subsidiaries, StarStone Insurance SE (Liechtenstein), StarStone Specialty Insurance Company (StarStone Specialty) and StarStone National Insurance Company (StarStone National). The outlook of these Credit Ratings (ratings) remains stable. StarStone Specialty and StarStone National are domiciled in Wilmington, Delaware, USA.
The ratings reflect StarStone’s consolidated balance sheet strength, which AM Best categorises as strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management. The ratings also benefit from the support of Enstar Group Limited (Enstar) and the Trident Funds managed by Stone Point Capital LLC (Stone Point), which taken together, own 98.3% of the StarStone group. The owners provide strategic and operational support to StarStone, as well as financial assistance if needed. This was demonstrated in 2019 through the facilitation, by Enstar, of a loss portfolio transfer (LPT). Another LPT facility is expected to be arranged before year end, which will materially protect the company from adverse experience in the run-off of already discontinued business.
AM Best expects StarStone’s consolidated risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), to remain at the strongest level at year-end 2019, taking into account the benefit of that further LPT of discontinued international business to Enstar before the end of the year. A degree of uncertainty around reserve adequacy is an offsetting factor to the balance sheet strength assessment.
StarStone has concluded a repositioning exercise to focus on underwriting profitable lines of business. Achieving sustainable underwriting profitability is likely to remain a challenge, given the strong competition in the company’s main business lines, and the risks associated with a major reorganisation remain. Nevertheless, AM Best expects the exercise to have a positive impact on performance in the short term. The stable rating outlook is based on AM Best’s expectation that the company’s underwriting performance will improve significantly in 2020.
StarStone generated significant underwriting losses in 2018 and 2019, driven in part by adverse prior year reserve development. The company’s five-year average combined ratio through December 2018 was 109%, and AM Best expects a technical loss in 2019, with a combined ratio in the region of 110%. StarStone’s recent performance has been affected by large losses in its construction line of business, as well as adverse experience on certain lines of U.S. excess casualty business.
Since its inception in 2008, StarStone has built scale through a combination of acquiring businesses and underwriting teams, and organic growth. As a result, StarStone now writes a diversified specialist portfolio from operations in London, Bermuda, the United States and Continental Europe.
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