Greenlight Reinsurance has had its financial strength rating reduced due to a poor run of underwriting results.
The specialist property and casualty reinsurer, which works with captives and risk retention groups, did report underwriting income of $600,000 in Q3 2016, up from a loss of $31.7 million year over year.
But the rise did not stop A.M. Best lowering the Cayman Islands-based reinsurer’s financial strength rating from “A (Excellent)” to “A- (Excellent)”.
A.M. Best also lowered Greenlight Re’s long-term issuer credit rating from “a” to “a-”.
The rating agency explained: “The rating actions reflect Greenlight Re’s less favourable underwriting results in recent years, including results through 30 June 2016, which have fallen short of A.M. Best’s long-term expectations.”
“While the company has taken actions to remediate the problematic contracts, it is showing an underwriting loss that under performs most peers on its five-year trend through 2015.”
“While A.M. Best acknowledges that the underwriting process and controls have since been strengthened, the current market environment will continue to present challenges and will ultimately test the sufficiency of the current underwriting rigour and enterprise risk management.”
Bart Hedges, CEO of Greenlight Re, said in a statement: “We have experienced several years of adverse development on construction defect contracts, which have negatively affected financial year results. We have novated these contracts to limit further exposure to this business. The remainder of our underwriting portfolio continues to perform in line with our expectations.”
