Top financial strength rating for Top Layer Re
AM Best has affirmed the financial strength rating of A+ (Superior) and the long-term issuer credit rating of “aa-” (Superior) of Bermudian-based Top Layer Reinsurance Ltd.
The outlook of these credit ratings is stable.
The ratings reflect Top Layer’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and very strong enterprise risk management.
The agency said these ratings continued to reflect the substantial amount of support Top Layer received from its co-owners, State Farm Mutual Automobile Insurance Company (currently with an FSR of A++ [Superior] and a long-term ICR of “aa+” [Superior]) and Bermudian-based Renaissance Reinsurance Ltd (currently with an FSR of A+ [Superior] and a long-term ICR of “aa-” [Superior]).
The ratings also reflect the significant parental support from State Farm, which provides Top Layer with explicit support as required by contract. In turn, Top Layer provides State Farm with exposure to non-US high layer reinsurance risk, which is uncorrelated to its own core business.
AM Best said Top Layer’s capital profile was unique. The company’s capitalisation is enhanced through various contractual obligations, resulting in substantial capital support and reinsurance protection from State Farm, and, to a much lesser degree, RenaissanceRe.
The occurrence of large losses will trigger capital calls for State Farm and RenaissanceRe to replenish Top Layer’s capital.
Moreover, State Farm provides Top Layer with $3.9 billion excess of $100 million stop-loss reinsurance protection. This coverage is significantly larger than the aggregate exposures Top Layer undertakes in each of its geographic zones.
Since Top Layer’s inception in 1999, it has generated solid operating results and sustained only two losses.
AM Best attributes this favourable result to the property catastrophe underwriting expertise of RenaissanceRe and the fact that there are very few catastrophes of a magnitude sufficient to impact the programmes written in Top Layer’s areas of focus, which are high excess layers of non-US property catastrophe risks.
Top Layer maintains a modest amount of on-balance sheet capital relative to the high excess layers of property catastrophe risks it assumes.
AM Best acknowledges that Top Layer’s ratings are largely dependent upon the support it receives from State Farm and RenaissanceRe.