AM Best affirms Validus Re ratings

15-07-2019

AM Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit ratings (Long-Term ICR) of “a” of Bermuda-based Validus Reinsurance and its affiliate, Validus Reinsurance (Switzerland).

The rating agency said that the outlook of the credit ratings are stable and that they reflect Validus Re’s balance sheet strength, which AM Best categorises as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

According to AM Best Validus Re’s balance sheet strength is supported by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as a liquid investment portfolio of high quality assets. Furthermore, Validus Re has a history of conservative reserving.

AM Best added that the group’s strongest level of capitalisation allows it to absorb the catastrophe losses inherent in its businesses. Validus Re’s operating performance has been consistent over the cycle, driven by solid underwriting profits and stable investment returns. The company’s underwriting performance is supported by continued focus on underwriting profit, although volatility is expected during high catastrophe years. The group maintains a well-diversified business profile, focusing on reinsurance. Validus Re has developed, implemented and embedded a risk management framework that appropriately addresses the risks inherent in its profile, and its risk management capabilities generally meet or exceed its risk profile.

However, AM Best added that partially offsetting these strengths are Validus Re’s exposure to high-severity events as a property catastrophe-focused reinsurer and the increased competition from capital markets in this space. In addition, any capital actions its parent, American International Group, may take in the future could alter AM Best’s view of capital strength, as well as Validus’ ability to grow profitably. Currently, the company’s risk-adjusted capital remains at levels that have been stress tested to absorb significant catastrophe losses mitigating this concern. 

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