AM Best has assigned a financial strength rating of A (Excellent) and a long-term issuer credit rating of “a” (Excellent) to Somerset Life Reinsurance (Somerset Life Re) (Bermuda). The outlook assigned to these credit ratings is stable.

The credit ratings agency said this reflected Somerset Life Re’s balance-sheet strength, which they assessed as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

Somerset Life Re is a start-up Bermuda-domiciled reinsurance company with section 953(d) United States taxpayer status. It is a subsidiary of Somerset Reinsurance.

AM Best said the US taxpayer status allows Somerset Life Re flexibility to reach a broader client base.

The firm is expected to rely on its parent for services as it expands its business profile.

AM Best expects the reinsurer to leverage its use of direct channels, brokers and strategic relationships to fuel new business.

“Planned growth is moderately aggressive as the company is expected to seek reinsurance opportunities for products with low to moderate risk,” AM Best said. “The company is expecting earnings strain from acquired business in the short term; however, over the medium-term earnings are projected to contribute measurably towards overall enterprise earnings.”

Additionally, AM Best anticipates that the parent company will aid in maintaining the risk-adjusted capital of Somerset Life Re, if needed.

The credit ratings agency went on to say that the ratings are afforded two notches of lift-off of Somerset Re.

“The addition of Somerset Life Re enhances Somerset Re Group’s ability to offer reinsurance solutions to offshore insurance entities that desire to transact with a US taxpayer,” AM Best said. “Furthermore, Somerset Life Re’s operating capabilities are fully integrated and co-sourced with its parent company for external functions.”

AM Best said the stable outlooks reflected their expectation that Somerset Life Re will grow risk-based capital to support its growth-oriented business plan, as it builds operational synergies through the sharing of services with its parent, Somerset Re.