KBRA Assigns Rating to Malibu Life Reinsurance SP 1, a Segregated Portfolio of Malibu Life Reinsurance SPC

NEW YORK--(BUSINESS WIRE)--KBRA assigns an A- insurance financial strength rating (IFSR) to Malibu Life Reinsurance SP 1 (Malibu Life Re SP1), a segregated portfolio established by Malibu Life Reinsurance SPC for the benefit of a single reinsurance counterparty. The Outlook for the rating is Stable.

Key Credit Considerations

The rating reflects strong contractual and collateral protections, satisfactory risk-based capitalization, favorable financial flexibility, a strong liquidity and ALM profile, experienced management and investment platforms, a predominantly investment grade portfolio, early stage profitable operating fundamentals, and developing ERM, governance and outsourcing frameworks. Since Malibu Life Re SP1 is not a separate legal entity, KBRA’s credit analysis did not rely on full legal-entity status, nor did it rely solely on the Cayman segregated portfolio company enabling legislation. Rather, Malibu Life Re SP1’s executed reinsurance and collateral trust agreements along with the segregated portfolio’s own capital position anchored KBRA’s analysis that was then supplemented by its legal and regulatory frameworks as well as explicit external support. Malibu Life Re SP1’s executed reinsurance agreement provides a defined scope of assumed annuity obligations and includes reporting, settlement, investment guidelines, trust collateral, suspension, recapture, triggering-event, and limited-recourse provisions. The funds withheld treaty structure keeps reserve-supporting assets legally owned and controlled by the cedant, while the economics accrue to Malibu Life Re SP1. The related trust account provides a manageable, defined collateral layer, including monthly valuation and top-up mechanics tied to ceded reserves. Malibu Life Re SP1’s capitalization is relatively strong, with YE2025 ACL RBC of 754% (based on reported CAL RBC of 377%), materially above its internal target as well as its minimum 500% ACL RBC regulatory requirement. Malibu Life Re SP1 relies primarily on capital contributions from Malibu Life Holdings Limited (LSE: MLHL), supplemented by limited stand-alone earnings generation since inception. During 2025, MLHL made a $46mm capital contribution to Malibu Life Re SP1 to support continued growth. Financial flexibility is further supported via a quarterly capital planning process and a capital support agreement provided by MLHL to Malibu Life Re SP1. KBRA views liquidity and ALM as strong given the size, marketability, guideline compliance, and contractual settlement mechanics of the funds withheld/trust structure. In addition to Malibu Life Reinsurance SPC’s seasoned management team, Malibu Life Re SP1 benefits from Third Point’s experienced credit platform, including asset allocation, sub-manager oversight, ALM/capital management, investment risk management, and operational support. KBRA believes that as of YE2025 Malibu Life Re SP1’s asset quality is generally favorable, with 92% of invested assets in investment-grade fixed income securities. The investment portfolio is liability-driven and designed to support annuity liabilities while generating spread under the funds withheld treaty. However, KBRA also notes that investment risk is moderate given structured credit, mortgage-related, private/illiquid, non-investment grade, fair value, and model/NAV-based exposures that add complexity to the portfolio. In KBRA’s opinion, Malibu Life Re SP1’s 109bps net spread earnings in 2025 are reasonable for an asset-intensive reinsurer in its initial years of operation, but do not yet reflect a stable multi-period earnings pattern. Because it is a segregated portfolio, Malibu Life Re SP1 does not maintain a standalone ERM framework. However, Malibu Life Re SP1 benefits from Malibu Life Reinsurance SPC’s Board-approved enterprise risk, governance, and internal control frameworks as applied to its specific treaty, assets, liabilities, and collateral. The frameworks include governance, risk appetite, risk reporting, stress testing, ALM, outsourcing oversight, and escalation mechanisms. However, KBRA notes that the frameworks are new, untested through a market cycle, and rely meaningfully on outsourced service providers. KBRA expects the frameworks to evolve over time to keep pace with Malibu Life Reinsurance SPC’s own growth.

Balancing these strengths are structural limitations of the segregated portfolio company model, a concentrated business profile, exposure to event risk, and limited operating history. While Cayman law permits segregation of assets and liabilities, the structure limits asset fungibility among segregated portfolios as well as between a segregated portfolio and the segregated portfolio company’s general account. The structure may also present legal recognition uncertainty outside Cayman. These structural constraints are mitigated by the segregated portfolio-specific nature of KBRA’s rating approach. Malibu Life Re SP1 has a very concentrated earnings profile as it was established to support one treaty for one counterparty. Like all asset-intensive reinsurers, Malibu Life Re SP1 is exposed to the impact of credit spread movements, downgrade/default risk, fair value volatility, interest rate shocks and policyholder behavior risk on its financial position. Malibu Life Re SP1 remains a young operating platform, with only a short period of seasoning since its May 2024 treaty inception. This limits visibility into through-cycle earnings stability, reserve assumption development, policyholder behavior, investment performance, collateral management, capital support execution, and the effectiveness of the governance and control environment under stress.

Rating Sensitivities

Positive rating action could occur if sustained earnings create a longer track record of stable, spread-based profits, if sustained risk-based capitalization remains comfortably above internal and regulatory targets under both base and stress scenarios, if growth is disciplined supported by timely and adequate capital contributions from MLHL and/or if investment risk concentration is reduced while maintaining strong liquidity discipline and asset-liability matching.

Negative rating action could occur if risk-based capitalization deteriorates, operating losses occur or compression in net spread is sustained, MLHL is unable or unwilling to provide timely capital support or the capital support agreement is weakened, terminated, not renewed or is no longer deemed legally or operationally effective, credit losses, impairments, spread volatility or investment guideline breaches materially weaken portfolio asset quality, cash flow or liquidity, a treaty triggering event, suspension or recapture occurs and/or legal, regulatory, tax or Cayman SPC-specific developments adversely affect Malibu Life Re SP1’s ring-fencing, capitalization, collateral or claims-paying resources.

MLHL is a recently repositioned, London-listed life and annuity holding company. It was created through the September 2025 combination of Third Point Investors Limited and Malibu Life Reinsurance SPC, with the stated strategy of originating attractive annuity/reinsurance liabilities and earning spread income through Third Point’s asset and risk management capabilities. MLHL owns Malibu Life Reinsurance SPC, and Malibu Life Re SP1 is the current operating segregated portfolio supporting a single life insurance counterparty.

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Recent Publications

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Methodology

• Insurance: Insurer & Insurance Holding Company Global Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

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