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A.M. Best has affirmed the financial strength rating of ‘A’ (Excellent) and the long-term issuer credit rating of ‘a’ (Excellent) of Lumen Re, based in Bermuda.
The outlook of these credit ratings is stable.
The ratings reflect Lumen Re’s balance sheet strength, which A.M. Best assesses as ‘Strongest’, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
According to A.M. Best, Lumen Re's risk-adjusted capital, as measured by Best's Capital Adequacy Ratio, is at its strongest level. Its liquidity, asset/liability management, quality of assets and use of internal capital models provide ample support of its balance sheet assessment.
Partially offsetting these rating factors is Lumen Re’s relatively high dependence on third-party retrocession.
However, A.M. Best notes that all retrocession will be written on a fully collateralised basis, which will minimise its exposure to losses and third-party credit risk. The company’s leverage, as measured by the ratio of retained limits to equity, is low.
In January 2024, Lumen Re was recognised as a reciprocal jurisdiction reinsurer in 37 US states, which will reduce operational burden and costs.
A.M. Best says Lumen Re’s overall operating performance is adequate and is expected to remain favourable given current market conditions.
Lumen Re’s business profile has been assessed as limited, as the company predominantly writes catastrophe excess of loss contracts and limited reinsurance protection programmes with well-established cedants in highly developed markets.
A.M. Best assesses Lumen Re’s ERM as appropriate, based on the company’s robust framework and governance that ensure a systematic and controlled process for the identification, monitoring, and reporting of underwriting and investment risks, as well as other relevant risks that affect its reinsurance operations.
