Best Affirms Montpelier Re Holdings and Company Ratings

April 16, 2014

A.M. Best has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of Montpelier Reinsurance Ltd. (Montpelier Re) as well as the ICR of “bbb” and debt ratings of the parent company, Montpelier Re Holdings Ltd. The outlook for all of the ratings is stable. Both companies are domiciled in Pembroke, Bermuda.

The ratings reflect Montpelier Re’s “excellent risk-adjusted capitalization, proven track record of operating profitability, diversified business profile, experienced management team and strong enterprise risk management framework,” Best explained.

As a partial offsetting factor Best noted the “company’s susceptibility to low frequency, high severity losses as a global property catastrophe-focused reinsurer.” Best added, however, that the “company’s risk-adjusted capital levels have been stress tested to withstand significant catastrophe losses,” thereby mitigating Best’s concern.

“Montpelier also maintains a diversified business mix, geographic spread of risk and distribution capabilities through its Lloyd’s Syndicate 5151 and Blue Capital, its wholly-owned asset management platform,” the report continued.

Best said the “stable outlook reflects Montpelier Re’s overall financial flexibility with access to capital markets and its overall rate adequacy in the lines of business targeted by the company. Although the market is competitive, Montpelier Re has the expertise to effectively compete in this relatively soft market.

“Montpelier Re continues to follow a prudent underwriting strategy to limit the potential accumulation of losses from a single large catastrophic event. Montpelier Re’s management monitors its underwriting constraints relative to capital-based limits established by its board of directors and diversifies its exposure globally to achieve a desired optimal spread of risk.

“Factors that could lead to rating upgrades and/or a positive outlook include Montpelier Re maintaining strong risk-adjusted capital levels and the continuation of long-term, consistently strong operating profitability relative to its peer group.

“Factors that could lead to rating downgrades and/or a negative outlook include outsized catastrophe or investment losses relative to its peer group, unfavorable operating profitability trends and a significant decline in risk-adjusted capital that would not be supportive of the current rating level.

The following debt ratings have been affirmed:

Montpelier Re Holdings Ltd.—

– “bbb” on $300 million 4.7% senior unsecured notes, due 2022

– “bb+” on $150 million 8.875% fixed rate perpetual non-cumulative preferred shares

Source: A.M. Best

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