A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of “a-” of Imagine Insurance Company Limited (Imagine) (Barbados). The ratings have been removed from under review with negative implications and assigned a negative outlook.
These rating actions follow A.M. Best’s review of Imagine’s risk-based capital strengthening plan following losses incurred from hurricanes Katrina, Rita and Wilma. Imagine’s capital base will be strengthened through the issuance of a privately held 10-year $50 million subordinate note with primary owner Brookfield Asset Management Inc.
The subordinate note will be issued by Imagine’s immediate parent, Imagine Group Holdings Limited (Barbados) and contributed to Imagine as common share equity. The contribution of the $50 million to Imagine, which is expected to be completed shortly, increases its risk-based capital score to an appropriate level for its current ratings.
The reinstatement of a negative outlook is based on Imagine’s business profile, which in addition to its portfolio of traditional insurance and reinsurance business, includes a significant level of both finite risk and traditional reinsurance with contractual caps or other loss mitigating features. The heightened level of scrutiny by state and federal regulators focused on finite reinsurance and contractually capped multi-year reinsurance transactions has resulted in subpoenas being issued to both sellers and buyers of finite products and as a result, present a heightened level of operational risk to Imagine. The future viability of finite products will remain uncertain until current governmental scrutiny is complete and any new requirements regarding finite products are established.
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