Top Layer Reinsurance Ltd., a joint venture between Renaissance Re and US insurer State Farm Mutual Automobile insurance, has had its financial strength rating lowered by Standard & Poor's in conjunction with a lowering of State Farm's rating.

Top Layer writes high-layer property/catastrophe reinsurance for non-US risks, excluding Caribbean wind but including Caribbean earthquake.

It is a 50/50 joint venture of SFMA and Renaissance Reinsurance Ltd. (counterparty credit and financial strength ratings `A+'), a strong Bermuda-based reinsurer. "Top Layer's underwriting and operations are supported by a $4 billion capital structure. Its underpinning is a $3.9 billion retrocessional stop-loss agreement from SFMA that is enhanced via a cut-through clause to Top Layer's policyholders if Top Layer becomes insolvent. In addition to the support from SFMA, the company had funded capital of $46.8 million as of December 31, 2001, and can draw up to $75 million in irrevocable standby letters of credit if a major loss occurs," said Standard & Poor's credit analyst Charles Titterton. "Because of these structural elements, Standard & Poor's assigned Top Layer the same ratings as SFMA," Titterton added.

SFMA, the parent company and flagship of the world's largest personal lines insurance group (State Farm Group), has experienced major, although diminishing, operating losses, prompting the lowering of its ratings. The State Farm Group remains extremely strongly capitalised, enjoys an unequalled geographical spread of risk in the US, S&P said.