AM Best has changed Renaissance Reinsurance’s long-term issuer credit rating outlook from stable to positive due to substantial improvements in its performance.

“Despite the continuation of elevated global catastrophe activity in recent years, RenaissanceRe has produced very strong operating performance from underwriting and fee generation,” AM Best said.

The firm experienced dampened volatility as its speciality and casualty lines earned into the portfolio, partially offsetting volatility in property catastrophe lines, which still serve as the company’ core.

RenaissanceRe appeared well positioned to benefit from continued, largely favourable overall market conditions in the global reinsurance space.

“Investment returns have increased significantly as RenaissanceRe’s relatively short-duration, fixed-income portfolio experienced a marked increase in yield as maturing issuances were reinvested at higher yields,” AM Best said.

The credit ratings agency also gave RenaissanceRe a financial strength rating of A+ (Superior) with a stable outlook and rated the long-term ICR as “aa-” (Superior).

The reinsurer’s ratings were due to the group’s balance sheet strength as well as its adequate operating performance, very favourable business profile and very strong enterprise risk management.

“Partially offsetting these strengths was RenaissanceRe’s exposure to high-severity losses associated with global catastrophe events,” AM Best said, “although the company’s underwriting results and overall operating performance have grown increasingly less volatile, as diversifying business lines have mitigated the impact of catastrophe losses.”

AM Best said the company’s growth in casualty lines exposed it to potential reserve volatility, although the company has protected itself with reinsurance that would absorb a portion of any losses in its reserves.

Additionally, AM Best affirmed the long-term ICR of “a-” (Excellent) of RenaissanceRe Holdings.

It also rated DaVinci Reinsurance’s FSR as A (Excellent), the long-term ICR as “a+” (Excellent) and the long-term ICR as “bbb+” (Good).

AM Best has also affirmed the FSR of A (Excellent) and the long-term ICR of “a+” (Excellent) of Vermeer Reinsurance.

It assessed DaVinci and Vermeers’ balance sheet strength as very strong.

The outlook of these ratings is stable.

AM Best said RenaissanceRe’s very favourable business profile reflected the company’s considerable global market position in the property catastrophe reinsurance segment. Its casualty and speciality lines now comprise more than half of its underwriting premiums and have been consistently profitable.

The company is also showing strong leadership in ERM, modelling capabilities and third-party capital management.

“It maintains a strong reputation in evaluating risk and effectively deploying capital,” AM Best said. “As a result, it has attracted capital from outside investors to form several successful joint ventures.”

These included DaVinci, Top Layer Reinsurance, Vermeer and most recently, Fontana Holdings, its first third-party reinsurance capital-backed joint venture focused on casualty and speciality risks.