Third Point Re has had its financial strength rating of A-(Excellent) and its issuer credit rating of “a-” affirmed by AM Best following a strong first year of operations.
The rating agency said that the affirmations were due to Third Point Re’s “excellent risk-adjusted capitalisation, the successful first year implementation of its business plan, including the build-out of its management team, as well as the above average performance of its investment portfolio.”
AM Best did however warn that the reinsurer faces headwinds associated with building its position in the market, increased levels of capacity entering the reinsurance market and risks associated with its investment strategy, which leverages links with New York hedge fund, Third Point.
The rating agency warned that Third Point Re could be exposed a convergence of risks associated with both its underwriting and investment side of its book. However, AM Best added that the reinsurers experienced underwriting team and Third Point’s impressive investment record “help to alleviate” its concerns.
Touching upon the implications of rising investor interest in the reinsurance space, AM Best said that Third Point Re “would be challenged by competition from established reinsurers as well as other start-up entities”, with increased competition likely to “pressure underwriting margins”..