Fed Re gets A- rating from AM Best

New Bermuda-based re/insurer Fed Re has been assigned an A- financial strength rating by AM Best as the company enters the long-term annuity reinsurance market. 

Fed Re, which is owned by Bain Capital affiliate Federal Life Group, was licensed by the Bermuda Monetary Authority in September, is the latest Class E re/insurer to enter the Bermuda market. 

The Class E designation means it has at least $500 million in assets. 

AM Best, which assigned the company a provisional rating earlier this month, said it reflected Fed Re’s balance sheet strength, which AM Best assessed as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The ratings agency said it expected Fed Re’s capital to increase through a  combination of organic growth and parental support. 

“Currently, the company’s capitalization is adequate to support its insurance and investment risks,” AM Best said. “AM Best will continue to monitor the development and appropriateness of Fed Re’s investment portfolio, asset allocation, asset liability management, as the liabilities grow over time within the organisation. 

“Further, AM Best expects Fed Re’s trend of profitable premium growth to continue, as management executes on its business plans, including its expansion and diversification efforts. Management has reported favourable early operating performance and expects earnings to be immediately accretive to capital based on its business plan.”

The agency said Fed Re is a subsidiary of Illinois-based Federal Life Group, and its ultimate parent, Insurance Capital Group (ICG). ICG is an affiliate of Bain Capital, and Fed Re is an affiliate of Federal Life Insurance Company. 

“Fed Re is expected to focus its reinsurance transactions primarily on multi-year guaranteed annuities (MYGA) from both multinational and domestic US. based carriers, fixed-indexed annuities, as well as generally lower-risk small-faced life insurance products.” AM Best said. “The MYGA business will be sourced by a combination of flows from Fed Life, as well as lead generation for reinsurance transactions from ICG. 

“An experienced management team supports Fed Re’s ability to meet expansion and profitability plans and capitalisation targets.”

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