RenaissanceRe’s rating is affirmed by AM Best

RenaissanceRe, which is due to close its purchase of AIG’s treaty reinsurance businesses including Validus by the end of the year, has had its ratings affirmed by AM Best.

The ratings agency said the Bermuda-based reinsurer’s financial strength rating of A+ remained in place and it assigned a stable outlook.

AM Best said the ratings reflected the group’s balance sheet strength, which the agency rated as strongest, as well as its “adequate operating performance, favourable business profile and very strong enterprise risk management”.

“AM Best’s assessment of RenaissanceRe’s overall balance sheet strength considers the positive impact of the financial flexibility provided by its ultimate parent, RNR, which typically maintains significant capital at the holding company level and is available to be downstreamed into its underwriting companies, as needed,” the agency said.

“RNR has consistently demonstrated its ability to raise capital through the public and private equity markets, as well as the public debt markets. RNR’s ability to attract and deploy capital during both favourable and challenging market cycles is an important consideration in AM Best’s assessment of the enterprise’s overall balance sheet strength and the individual balance sheet assessments of RNR’s operating companies.”

RenaissanceRe is due to close its $3 billion purchase of Validus, Alpha Cat Managers and Talbot from AIG by the end of the year.

AM Best also credited the strength of RNR’s management team, led by chief executive officer Kevin O’Donnell (pictured), and its ability to deliver strong, long-term profitability over the course of the market cycle.

“While RenaissanceRe remains a leader in the property catastrophe reinsurance segment, the company has gained significant traction in casualty and specialty lines, which now comprise more than half of its underwriting premiums,” AM Best said. “RenaissanceRe is also widely recognized for its leadership in ERM, modeling capabilities and as a pioneer in third-party capital management, where it maintains a strong reputation in evaluating risk and effectively deploying capital.

“As a result, it has attracted capital from outside investors to form several successful joint ventures, including DaVinci, Top Layer Reinsurance Ltd., Vermeer, and most recently, Fontana Holdings L.P., its first third-party reinsurance capital-backed joint venture focused on casualty and specialty risks.”

The ratings agency said RenaissanceRe’s exposure to high severity losses associated with global catastrophe events offset its strengths, but noted the company’s underwriting results and overall operating performance had grown increasingly less volatile, as diversifying business lines have mitigated the impact of catastrophe losses.

“Looking forward, RenaissanceRe appears well-positioned to benefit from ongoing broad-based pricing improvement in several of its key product lines, particularly in property catastrophe reinsurance, which saw material rate improvement and tighter terms and conditions at each of the key 2023 renewal periods.”