AM Best affirms Validus subsidiaries’ ratings after merger
Ratings agency AM Best has given a seal of approval to RenaissanceRe’s purchase of the Validus reinsurance group from AIG.
The ratings agency said it had completed a review of RenRe’s plans for the group and said it had removed the companies from under review with developing implications and affirmed the financial strength rating for Validus Reinsurance (Bermuda) and Validus Reinsurance (Switzerland). The outlook for both companies is stable.
RenRe bought the Validus companies last November for $3.5 billion. The purchase included Validus Re and its consolidated subsidiaries, AlphaCat Managers and all renewal rights to the assumed reinsurance treaty unit of Talbot.
“AM Best notes that the underwriting portfolios of Validus Re and VRS are in the process of being de-risked significantly, as their business is being renewed with separate RenRe Holdings affiliates,” the agency said.
“Exposure to Validus’ legacy liabilities is curtailed largely by the existence of a reserve development cover, under which AIG retains 95% of favourable or unfavourable reserve development on business written by Validus prior to its acquisition by RenRe Holdings.”
It added: “RenRe Holdings has put in place explicit support for both Validus Re and VRS, in the form of net worth maintenance agreements, which supplements the explicit support that is based on AM Best’s expectation that RenRe Holdings will manage the Validus balance sheets to the same risk and capital management standards that it applies to its existing balance sheets.”
AM Best assessed Validus Re’s and VRS’ balance sheet strength as very strong, classed their operating performance as adequate and said their enterprise risk management was appropriate.
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