AM Best has improved the outlook for two subsidiaries of Bermudian-based Convex Group Ltd.

The agency has revised the outlooks to positive from stable and affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit ratings of “a-” of Bermudian-based Convex Re Ltd and Convex Insurance UK Ltd.

AM Best said the ratings reflect Convex’s consolidated balance sheet strength, which the agency assesses as very strong, as well as the group’s adequate operating performance, limited business profile and appropriate enterprise risk management.

It said the ratings factor in the strategic importance of Convex UK and Convex Re to the Convex group.

Convex UK is the group’s UK-based specialty re/insurer and Convex Re is the group’s Bermudian-based reinsurer; in addition to writing third-party reinsurance, it provides intra-group reinsurance protection to Convex UK, AM Best said.

The agency said Convex has demonstrated good market acceptance since its inception in 2019, exceeding $1 billion of consolidated gross written premium in 2020, its first full year of operation.

In addition, it has successfully raised an additional $1.5 billion of committed capital from new and existing investors, which brings the group’s total committed capital to $3.2 billion.

The agency said the revision of the outlooks to positive reflects its expectation that Convex’s underwriting portfolio will continue to grow and diversify successfully as the group develops its UK and Bermudian operations. This could lead to an improved business profile assessment, it said.

AM Best said Convex is expected to maintain risk-adjusted capitalisation comfortably in excess of minimum required for the strongest assessment, as measured by Best's capital adequacy ratio, taking into account AM Best's additional capital requirements for new company formations.

It said the group’s balance sheet strength is supported by a conservative investment portfolio and good financial flexibility. A partially offsetting rating factor is Convex’s material exposure to catastrophe risk and its dependence on reinsurance to manage this risk.

AM Best said Convex faces strong competition from well-established peers in its target markets and is highly reliant on brokers to access business.

Nonetheless, the likelihood of successful execution of the business plan is enhanced by the strong track record of senior management and underwriters that have extensive experience in the re/insurance industry and the group’s demonstrated market acceptance to date, the agency said.