AM Best affirms financial strength of Lumen Re

AM Best has affirmed the financial strength rating of A (‘excellent’) of Bermuda-based Lumen Re. The outlook of the rating is stable.

The rating reflects Lumen’s “strong” balance sheet, “adequate” operating performance, “limited” business profile and “appropriate” enterprise risk management, AM Best said.

Lumen Re’s risk-adjusted capitalisation, as measured by AM Best’s capital adequacy ratio, is at the strongest level, while its liquidity, asset and liability management, quality of assets and use of internal capital models provide ample support of its balance sheet assessment, the rating agency added.

Lumen’s relatively high dependence on third-party retrocession partially offset these advantages, it said, but all retrocession will be written on a fully collateralised basis, thus minimising its exposure to losses and third-party credit risk.

Luman began a de-risking and re-underwriting process, following increased losses from peak and secondary peril events in 2021, to improve contract terms and raise attachments in order to prevent future outsize loss experiences. Its pricing strategy is to focus on underwriting profits and not on asset returns.