Fitch raises Montpelier outlook to positive
Fitch Ratings has affirmed the A- insurer financial strength (IFS) rating of Montpelier Reinsurance Ltd., the principal (re)insurance operating subsidiary of Montpelier Re Holdings Ltd, and has revised the rating outlook to positive from stable.
The outlook revision, which indicates Fitch may upgrade the Bermuda-based company's rating if favourable trends contiue, reflects “Montpelier's solid operating performance and increasingly less volatile operating profile”, the ratings agency announced.
Fitch added that this change of profile was the result of key initiatives implemented in the aftermath of 2005, when the company suffered significant hurricane losses. “In the aftermath of these events, Montpelier implemented a more rigorous enterprise-wide risk management process that Fitch believes resulted in a significantly lower risk appetite and reduced potential for future volatility,” stated the ratings agency's commentary.
“Additionally, Montpelier has established platforms in the Lloyd's US surplus lines markets that have targeted business lines that are not correlated with the company's core catastrophe reinsurance lines. Montpelier's Lloyd's Syndicate 5151, in particular, has steadily grown as a percent of Montpelier's overall business, and has reported largely favorable underwriting results over its admittedly short operating history.”
Fitch believes that the net effect of these steps is likely to be less volatile results over time.
Fitch noted that diversifying businesses lines continue to grow as a percentage of Montpelier's overall underwriting portfolio and have become steady, meaningful contributors to Montpelier's earnings.
Moreover, Fitch observed that the company's share of global catastrophe losses over the last several years has been manageable and consistent with levels that might be expected from a reinsurer of Montpelier's size and focus. This performance lends confidence in Montpelier's approach to risk management.
Fitch said it believes “Montpelier uses sound risk management processes to manage its exposure to potential catastrophe-related losses by geographic zone and relative to its capital base”.