LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-“ of Kelvin Re Limited (Kelvin Re) (Guernsey). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Kelvin Re’s balance sheet strength, which AM Best categorises as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
Kelvin Re has generated mostly negative underwriting results in its short history of operation, having been impacted by catastrophe losses in 2017, 2018 and year-to-September 2019 (as calculated by AM Best). These losses are reflective of the company’s business model and are within its risk appetites. AM Best expects Kelvin Re to generate positive technical performance in catastrophe benign years; however, should the company’s underwriting results not improve in the medium term, negative rating action is likely.
Kelvin Re’s balance sheet strength is underpinned by the strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio, proven financial flexibility and a dynamic retrocession programme. In addition, the company maintains a relatively high level of capital relative to its underwriting and investment exposures; capital levels were further bolstered in 2019 following a capital injection of USD 350 million in the form of additional hedge fund assets. As a result, the company’s capital stood at USD 989 million at September 2019. AM Best understands that the additional capital will be utilised to support the company’s strategic objectives.
Volatility in the company’s reserves relating to adverse development of catastrophe losses, is an offsetting factor in the balance sheet strength assessment. In addition, the company maintains an elevated investment risk appetite, given its nontraditional investment strategy with material asset allocations to its hedge fund portfolio. The company’s hedge fund portfolio was diversified further in 2019, and consequently, volatility in its investment performance is expected to reduce going forward.
Kelvin Re is a privately owned company based in Guernsey that provides short-tail property catastrophe and specialty lines reinsurance. The company derives its business using the origination capabilities of Credit Suisse’s Insurance-Linked Strategies team, a leading insurance-linked securities hedge fund. Kelvin Re’s ERM is considered appropriate given the size and complexity of its operations. Kelvin Re works with a range of reputable partners to support management of its catastrophe risk appetite, reinsurance purchasing strategy, investment allocation and access to distribution channels.
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