Fortitude Re awarded ‘excellent’ financial strength ratings from AM Best

AM Best has given Fortitude Reinsurance Company financial strength and long-term issuer credit ratings of A (excellent), reflecting the company’s strong balance sheet strength.

The ratings firm also said the Bermudian reinsurer demonstrated “adequate operating performance, neutral business profile and appropriate enterprise risk management”.

In a statement, AM Best said: “The company’s genesis as a carve-out of AIG afforded it the ability to enter the market with an already established portfolio of assets and reserves as one of the largest run-off reinsurers in the Bermuda market. Fortitude Re also benefits from an established operating platform and a quality management team that possesses significant experience and a solid track record managing the types of business that Fortitude Re now seeks to transact with third parties.”

AM Best also said it expects that Fortitude Re will further benefit from The Carlyle Group’s illiquid asset origination capabilities as it builds out its investment portfolio over time to match its long-dated insurance liabilities.

Fortitude Re has an “excellent” risk-adjusted capitalization and AM Best expects it will maintain similar levels of capital strength consistently as the company executes transactions that may add materially to the company’s portfolio of invested assets and reserves.

Through its relationship with majority owner, The Carlyle Group, AM Best said it believes that Fortitude Re possesses “sufficient financial flexibility” to source additional capital if needed to support its underwriting operations.

The overall balance sheet assessment of very strong also recognizes that Fortitude Re's long-dated investment portfolio, which includes allocations to private and alternative investments, and long-tail reserves introduce “significant potential volatility to the company's capital position”.

Fortitude Re has generated operating profits each year since incorporating in 2018 and in its relatively short history as an independent entity. “Given Fortitude Re’s longer-dated run-off liabilities, the company’s operating performance metrics could vary meaningfully from year to year, leading to occasional balance sheet volatility,” said AM Best.

The ratings firm expects that Fortitude will demonstrate adequate returns on capital over the longer term.