AM Best has downgraded the financial strength rating to A (Excellent) from A+ (Superior) and the issuer credit ratings (ICR) to “a+” from “aa-” for Risk Reinsurance (RRL). The outlook for both ratings is stable.
RRL is the single parent captive of Transpower New Zealand, the state-owned, sole operator of New Zealand’s electricity grid.
The rating actions consider the high event retentions relative to RRL’s capital target, which potentially could result in significant fluctuation of its risk-adjusted capitalisation. Following a large dividend payment to Transpower in August 2013, RRL’s capital target has been set at £25.7 million.
Positive rating factors include RRL’s strong balance sheet strength and capital generation ability. The quality of Transpower’s risk management has benefitted RRL’s underwriting results since its inception and sustained its capital generation ability so far.
Positive rating actions are unlikely at present, though negative rating actions could occur if RRL’s capital target is further reduced relative to its event retentions.
