AM Best has affirmed the A- financial strength rating of Enact Re Ltd, citing the Bermuda reinsurer’s very strong balance sheet and close relationship with its parent company in the United States.

The ratings agency also affirmed Enact Re’s long-term issuer credit rating of “a-”, with a stable outlook.

Enact Re is a Class 3A Bermuda reinsurer and a direct subsidiary of Enact Mortgage Insurance Corp, a North Carolina-based private mortgage insurer within Enact Holdings Inc. The Bermudian company provides quota share reinsurance to its parent.

AM Best said Enact Re’s ratings reflected its very strong balance sheet strength, adequate operating performance, limited business profile and appropriate enterprise risk management. Its close relationship with Enact Mortgage Insurance Corp also provides rating support.

The company’s capital position was assessed as very strong, based on AM Best’s capital adequacy measure. The agency said the measure could fluctuate as Enact Re expands its credit insurance business, but is expected to remain at a very strong or strong level in the near term.

Enact Re has continued to build equity through retained earnings, AM Best said.

The Bermuda reinsurer began assuming risk in 2023 and has increased its net income each year since then, benefiting from the performance of Enact Mortgage Insurance Corporation’s mortgage insurance business.

AM Best said other credit-related lines were expected to become a more meaningful part of Enact Re’s operating performance in future years.

However, the agency described the company’s business profile as limited because it is concentrated in areas including US single-family mortgage reinsurance. The performance of that business can be closely linked to wider economic conditions.

Enact Re operates under the same enterprise risk management framework as its parent, which AM Best assessed as appropriate for the size and complexity of the business.

The company shares management and key functions, including finance, claims, underwriting and actuarial support, with the wider Enact Holdings group.

AM Best said Enact Re provides the group with capital flexibility through its quota share arrangement with Enact Mortgage Insurance Corporation. It also gives the organisation a vehicle to take on other forms of risk that its mortgage insurance subsidiary cannot underwrite.