Premia Re's 'A' rating affirmed
Bermuda-based legacy insurer Premia Reinsurance's strong operating performance has resulted in its A financial strength rating being affirmed by ratings agency KBRA.
The agency said Premia, led by chief executive officer Bill O'Farrell, had earned $197 million since its inception and had reported positive results since it wad founded in 2017.
"Premia Re has reported net income each year since inception, totaling $197.2 million through the end of 2023," the agency said. "Despite an underwriting loss of $27.1 million during 2023, driven by $32.6 million in net unfavourable loss reserve development, Premia Re reported $34.1 million net income for the year.
"Based on a strong pipeline and Premia’s consistent, conservative approach to the business, KBRA believes that Premia Re should be able to continue its track record of positive net financial results."
However, KBRA noted that the legacy market was changing and becoming more uneven while long-tail reserves were exposed to adverse developments.
"While KBRA notes that the nominal dollar amount of legacy reserves continues to grow, it also notes that the number of legacy acquirers has been shrinking over the recent past," the agency said. "Based on recently announced deals, the trend appears to be toward fewer, larger deals making the acquisition of legacy liabilities even more uneven than it inherently is. In addition, recent bid/ask spreads have made it hard to close deals without a catalyst.
"Long-tailed reserves, such as those assumed by Premia, are exposed to a high risk of change due to evolving societal, legal, regulatory, and macroeconomic environments over the life of the claims settlement process."
However KBRA said Premia's overall risk-based capitalisation was strong and noted that its holding company's BSCR coverage ratio was 211% (2022: 219%), while Premia Re’s was 366% (2022: 384%).
"Given the material balance of unrestricted cash at the holding company, solid service fee income, and significant dividend capacity from Premia Re, KBRA believes that Premia Holdings’ debt service coverage is strong. Premia has a proven track record of prudently accessing capital from banks as well as the private debt and equity markets. Premia can also utilise contingent capital from its strategic sponsor via reinsurance support," KBRA said.
"Premia is led by an experienced team of professionals with significant underwriting, structuring, claims, and investment expertise backed by a growing staff across its platform. KBRA believes that Premia has a comprehensive, and continually evolving, enterprise risk management framework. The group performs extensive modeling and stress testing of individual transactions as well as the entire portfolio to ensure that capital remains sound, liquidity is strong to pay liabilities when due, and regulatory requirements are met. KBRA believes that Premia operates under conservative risk tolerance and guidelines."
It added: "Based on a strong pipeline and Premia’s consistent, conservative approach to the business, KBRA believes that Premia Re should be able to continue its track record of positive net financial results. Balancing these strengths are current legacy market dynamics and potential adverse reserve development."
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