AM Best affirms Third Point Re’s A- rating
Rating agency AM Best Co has affirmed the credit and financial strength ratings of Third Point Reinsurance Company Ltd.
The agency maintained its financial strength rating of A- (excellent) and issuer credit rating of “a-” saying the outlook for both ratings is stable.
AM Best said ratings of the Bermuda-based reinsurer are based on its “excellent risk-adjusted capitalisation, the successful first year implementation of its business plan including the build-out of its management team, as well as the above average performance of its investment portfolio”.
However, the agency said that offsetting those positive rating factors are the start-up nature of Third Point Re, the greater investment risk associated with its alternative investment strategy and the increasing competition and capacity in the reinsurance marketplace.
“TP Re could be exposed to a convergence of events that could test its capital strength. The underwriting risk along with significant investment risk could have a duplicative adverse effect on its risk-adjusted capital,” AM Best said in a statement.
“However, TP Re’s low underwriting leverage, experienced underwriting team and its 18-year successful investment track record help to alleviate AM Best’s concerns.”
The assets of Third Point Re are managed by Third Point LLC, a New York-based SEC-registered investment manager with more than $10.1 billion of assets under management. Third Point Re’s assets will be in a separate portfolio within Third Point LLC and will not be combined with other investors at Third Point LLC.
AM Best also said it anticipates Third Point Re’s management will be challenged by competition from established reinsurers as well as other start-up entities.
“The addition of more capital to an already overcapitalised reinsurance marketplace could pressure underwriting margins,” the agency said.
Moving forward, AM Best said key rating triggers that could result in positive rating actions would be TP Re meeting or exceeding its business plan over the long term. Triggers that could result in negative rating actions would be TP Re not executing its business plan over the long term.