Convex, Convex Re awarded A- ratings from S&P
Bermuda-based Convex Re and UK-based Convex Insurance have both been awarded financial strength ratings of A- with a stable outlook from S&P Global Ratings.
S&P highlighted Convex Group’s extremely strong capital adequacy. The group's initial capital base comprises $1.7 billion in shareholder's equity, which gives it a large excess of capital above S&P’s Triple A benchmark. This capital strength is unlikely to change imminently, S&P said.
S&P also highlighted the experience of its management team, many of which were long-time executives at Catlin Group and have significant experience. The rating agency said, for this reason it is not treating Convex as a startup.
“It is, in our view, a "greenfield" insurer that benefits from the Catlin Group's reputation and the shared management experience at Catlin,” it said. Accordingly, S&P expects Convex to have a smaller premium base compared with peers, and to build up scale over the next two to three years.
However, S&P warned that, as a relatively small company with limited diversification, it still faced challenges. “It is likely to be exposed to catastrophe risk through the mix of business it writes and to execution risk through its ambitious business plan,” S&P said.
“It is unlikely to be profitable until it has built a bigger premium base,” S&P warned. “Under our base-case scenario, we estimate that its combined ratio will be over 100 percent in 2020, but close to 95 percent in 2021.”
Convex Group started writing business in May 2019 after receiving approval from UK and Bermuda regulators. The group writes both insurance and reinsurance business and focuses on more-complex risks that cannot be automated.
