A.M. Best has affirmed the financial strength rating (FSR) of “A (Excellent)” and the issuer credit ratings (ICR) of “a+” of Transatlantic Reinsurance Company and its subsidiaries, Fair American Insurance and Reinsurance Company, Fair American Select Insurance Company, TransRe London and Trans Re Zurich, collectively referred to as TransRe.
In addition, A.M. Best has affirmed the ICRs of “bbb+” and debt ratings of Alleghany Corporation and Transatlantic Holdings. The outlook of all ratings remains positive.
According to the agency, the positive outlook continues to reflect TransRe’s “strong risk-adjusted capitalisation, solid operating results and robust risk management practices”.
The ratings also reflect TransRe’s “well-regarded” global business profile, with roughly 50 percent of premiums coming from outside the US, which provides diversification on a line of business and geographic basis.
TransRe has also taken advantage of third-party capital through its use of its Pillar and Pangaea facilities without materially impacting its risk profile.
Despite challenging investment and reinsurance market conditions, the relatively low level of catastrophic activity has helped TransRe produce two consecutive years of strong overall earnings and allowed for surplus appreciation.
A.M Best said: “TransRe also benefits from being part of a more widely diversified organisation with the operational support and stability provided by Alleghany. Alleghany’s ownership has allowed TransRe to focus on operations while providing financial flexibility and access to capital, if needed.”
Partially offsetting these positive attributes are A.M. Best's concerns regarding current conditions in the reinsurance market, which have become increasingly competitive due to increased capacity in the market and greater retentions among primary insurers, putting additional pressure on traditional reinsurers.
According to A.M Best, potential upward movement on TransRe's ratings could result from continued consistent or improved operating performance and sustained strong risk-adjusted capitalisation.
Negative rating actions could occur if TransRe incurs an “outsized catastrophic or investment loss” relative to its peer group, its operating performance consistently falls below the market, or an erosion of its capital base and a decline in its risk-based capitalisation.
