AM Best places StarStone under review following Enstar recapitalisation plan

AM Best has placed the financial strength ratings of StarStone Insurance Bermuda and its rated subsidiaries under review with negative implications.

The move comes in response to Enstar Group’s announcement on June 10 that its majority stake in StarStone will be diluted to a minority interest through capital provided by new investors, with parts of the business placed in runoff.

StarStone currently enjoys a rating of A- (excellent). AM Best said it had placed the credit on review due to its expectation that the rating enhancement provided to StarStone Insurance Bermuda and StarStone Insurance, through Enstar’s majority ownership, will be removed on completion of the transaction.

AM Best said the review will be resolved once it has completed a ground-up analysis of other StarStone subsidiaries to evaluate the impact of the planned transaction. It pointed to uncertainty surrounding the risk-adjusted capitalisation of StarStone subsidiaries following the restructuring of the group.

“There may be negative pressure on the business profiles of these companies, given the runoff nature of the remaining business,” it added.