A.M. Best has affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of "a-" of Kelvin Re Limited (Kelvin Re). The outlook of these credit ratings remains stable.
Kelvin Re is a privately owned company based in Guernsey that provides short-tail property catastrophe and speciality lines reinsurance. The company derives its business using the origination capabilities of Credit Suisse’s insurance-linked strategies team.
A.M. Best said the ratings reflect Kelvin Re’s balance sheet strength, which was categorised as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
However, Kelvin Re has generated mostly negative underwriting results in its short history of operation, having been impacted by catastrophe losses in most years.
Following the publication of the company’s financial results for 2019, A.M. Best noted the negative impact of a number of catastrophe events in the year as well as adverse experience on reserves relating to catastrophe events in 2017 and 2018.
However, the rating company said that the losses are reflective of the company’s business model and are within its risk appetite.
In line with its business plans, Kelvin Re has modified its underwriting exposures in 2020, which is expected to reduce the volatility in technical performance going forward.
According to A.M. Best, the successful execution of the company’s strategy is subject to execution risk.
Kelvin Re’s balance sheet strength is underpinned by the strongest level of risk-adjusted capitalisation, excellent financial flexibility and a dynamic retrocession programme, A.M. Best noted.
The rating firm said that the capital requirements are mainly driven by Kelvin Re’s exposure to catastrophe risks and the company’s holdings of alternative investment assets.
It added that to address these risks, Kelvin Re maintains a relatively high level of capital and surplus, which stood at $934.1 million at year-end 2019.
Despite the company’s relatively high investment risk profile, the alternative assets produced a robust performance in the Q1 of 2020, despite volatility in global financial markets.