Top Layer Re’s financial strength rating affirmed

Top Layer Re, a Bermuda-based reinsurance vehicle backed by Allstate and RenaissanceRe, has had its A+ financial strength rating affirmed.

Ratings agency AM Best said the rating reflected Top Layer’s balance sheet strength, which AM Best assessed as strong, as well as its adequate operating performance, neutral business profile and very strong enterprise risk management.

“These ratings continue to reflect the substantial amount of support Top Layer receives from its co-owners, State Farm (currently with an FSR of A++ and Renaissance Reinsurance (currently with an FSR of A+,” AM Best said.

“The ratings also reflect the significant parental support from State Farm, which provides Top Layer with explicit support as required by contract. In turn, Top Layer provides State Farm with exposure to non-US high layer reinsurance risk, which is un-correlated to its own core business.”

AM Best sad Top Layer’s capital profile was unique, as its capitalisation is enhanced through various contractual obligations “resulting in substantial capital support and reinsurance protection from State Farm, and, to a much lesser degree, RenaissanceRe”

“The occurrence of large losses will trigger capital calls for State Farm and RenaissanceRe to replenish Top Layer’s capital,”  AM Best said. “Moreover, State Farm provides Top Layer with $3.9 billion excess of $100 million stop-loss reinsurance protection. This coverage is significantly larger than the aggregate exposures Top Layer undertakes in each of its geographic zones.”

AM Best said Top Layer had only sustained two losses since it was launched in 1999 which AM Best attributed to the property catastrophe underwriting expertise of RenaissanceRe, and to the fact that there are very few catastrophes of a magnitude sufficient to impact the programmes written in Top Layer’s areas of focus, which are high excess layers of non-US property catastrophe risks.