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Best expects adequate returns from Fortitude

A Bermuda run-off reinsurer that originated through various legacy reinsurance transactions with former majority shareholder, American International Group, Inc. (AIG), has been assigned a stable financial strength rating of A (Excellent) and stable long-term issuer credit rating of “a” (Excellent) from A.M. Best.

Fortitude Re (Fortitude Reinsurance Company Ltd.) covers life and property/casualty risks globally.

AIG sold its majority interest in Fortitude Re to The Carlyle Group and T&D Holdings Ltd in the second quarter of 2020.

Best commented: “Fortitude Re has a fairly short track record as an entity independent of AIG, and its reserves represent legacy business that was assumed from AIG.

“The company’s genesis as a carve-out of AIG afforded it the ability to enter the market with an already established portfolio of assets and reserves as one of the largest run-off reinsurers in the Bermuda market.

“Fortitude Re also benefits from an established operating platform and a quality management team that possesses significant experience and a solid track record managing the types of business that Fortitude Re now seeks to transact with third parties.

“AM Best expects that Fortitude Re will further benefit from The Carlyle Group’s illiquid asset origination capabilities as it builds out its investment portfolio over time to match its long-dated insurance liabilities.

“AM Best will monitor Fortitude Re’s progress executing transactions in the open market in support of the expectation that Fortitude Re will gain further traction as a run-off specialist.

“The very strong balance sheet strength assessment considers Fortitude Re’s excellent risk-adjusted capitalisation and AM Best’s expectation that Fortitude Re will maintain similar levels of capital strength consistently as the company executes transactions that may be significant in size and add materially to the company’s portfolio of invested assets and reserves.

“Through its relationship with majority owner, The Carlyle Group, AM Best believes that Fortitude Re possesses sufficient financial flexibility to source additional capital if needed to support its underwriting operations.

“The overall balance sheet assessment of very strong also recognises that Fortitude Re’s long-dated investment portfolio, which includes allocations to private and alternative investments, and longtail reserves introduce significant potential volatility to the company’s capital position.

Fortitude Re has generated operating profits each year since incorporating in 2018 and in its relatively short history as an independent entity.

Given Fortitude Re’s longer-dated run-off liabilities, the company’s operating performance metrics could vary meaningfully from year to year, leading to occasional balance sheet volatility.

James Bracken Chief Executive Officer of Fortitude Reinsurance Company Ltd. (Fortitude Re), a Bermuda Class 4and Class E composite reinsurance company, primarily a reinsurer of general insurance and lifeinsurance run-off business

Over the longer term, AM Best expects that Fortitude will demonstrate adequate returns on capital.

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Published August 09, 2021 at 5:42 pm (Updated August 09, 2021 at 5:42 pm)

Best expects adequate returns from Fortitude

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