A.M. Best has affirmed the financial strength rating of A+ and issuer credit rating of “aa-” of Risk Reinsurance Limited (RRL) in the Cayman Islands.
The ratings reflect the firm’s superior capitalisation and balance sheet strength, profitable results, as well as the strategic role it performs as a captive insurance company for Transpower New Zealand, a state-owned enterprise of the Government of New Zealand.
Partially offsetting positive rating factors is the source of Transpower’s business is limited to hazards—with the potential for a substantial loss for RRL. RRL has experienced extensive earthquake activity within the past 30 months and has exhibited excellent maintenance of adequate surplus levels. The company cedes excess exposure layers to reinsurers with strong FSRs.
RRL does not insure any third-party risks. All investment assets are placed in a conservative and highly liquid portfolio consisting of cash equivalents and bonds. Investments are restricted to the New Zealand, Australian and US dollar-denominated instruments. RRL benefits from Transpower's strict adherence to the New Zealand regulatory risk management framework, enhanced by its own integration within its parent’s risk structure.
RRL benefits from the strong implied support of Transpower, which provides RRL with additional levels of financial flexibility. RRL has the advantage of the dedicated attention of its management team to ensure its sound operation and financial security.
It is unlikely that A.M. Best will upgrade RRL from its current rating level, given its overall business profile. Potential negative rating actions could result if RRL stopped being supported by Transpower with regard to surplus levels.
