OLDWICK, N.J.--(BUSINESS WIRE)--
A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” of Greenlight Reinsurance, Ltd. (Greenlight Re) (Cayman Islands) and Greenlight Reinsurance Ireland, Designated Activity Company (Ireland). A.M. Best also has affirmed the Long-Term ICR of “bbb-” of Greenlight Capital Re, Ltd. (Cayman Islands) [NASDAQ: GLRE], the ultimate holding company. The outlook of these Credit Ratings (ratings) remains stable.
The ratings of Greenlight Re are based on its strong risk-adjusted capitalization, experienced management team and strong enterprise risk management practices, as well as the overall implementation of the business strategy. The ratings for Greenlight Reinsurance Ireland, Designated Activity Company consider the above-mentioned attributes and the support from Greenlight Re and its ultimate parent, Greenlight Capital Re, Ltd.
These positive rating factors are partially offset by the greater investment risk associated with its alternative investment strategy and the challenges Greenlight Re faces writing profitable business in current market conditions. Also detracting from the company’s strengths is the investment risk associated with a portfolio that is primarily composed of publicly traded equity securities. However, this concern has been lessened as Greenlight Re’s investment portfolio is actively managed and has performed well over the longer term. Furthermore, more than 80% of the invested assets are in highly liquid investments, and generally, no position can be greater than 20% of invested assets. A.M. Best’s rating approach involves assessing Greenlight Re’s risk correlations across the enterprise by subjecting its capitalization to concurrent adverse stress test events. The company’s risk-adjusted capitalization withstands substantial amounts of strain when subjected to these various catastrophe and investment stress scenarios. A.M. Best’s expectation is that losses from Hurricanes Harvey, Irma and Maria will be within Greenlight Re’s risk tolerances, as well as within A.M. Best expectations, as A.M. Best looks across the losses relative to the broader peer group. A.M. Best will continue to monitor the developments associated with these events and their impact on Greenlight Re. Should ultimate losses materially deviate from expectations, A.M. Best will update the market with regards to its rating opinion on Greenlight Re.
Greenlight Re operates as a broker market reinsurer writing a combination of property, casualty and specialty reinsurance business. The company has been successful in building its underwriting team’s infrastructure and adding new business using a partnership-oriented approach to underwriting. Additionally, underwriting and investment assumptions are combined to develop a risk profile on both sides of the balance sheet. Catastrophe aggregate downside limits are in place and capped at the board level. While Greenlight Re’s underwriting results have been below expectations in recent years, A.M. Best recognizes the remediation actions taken by the company’s management.
Factors that may contribute to positive rating actions include improvements in the company’s underwriting results, continued lack of material catastrophe losses and positive investment performance. Alternatively, ratings could be negatively impacted by continued adverse reserve development, coupled with negative investment results and poor underwriting performance, which could collectively contribute to a significant deterioration of surplus.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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