A.M. Best Co. announced that it has assigned a financial strength rating (FSR) of “A” (Excellent) and an issuer credit rating (ICR) of “a” to the newly created Bermuda-based reinsurer Harbor Point Re Limited, with a stable outlook.
Harbor Point is a spin-off of the reinsurance operations of Chubb Re, a subsidiary of Chubb Corp.. Its initial capitalization was $1.3 billion. In the exchange for the business acquired a $200 million convertible note was issued to Chubb. The principal investors in Harbor Point are Trident III, L.P., J.P. Morgan Chase & Co and Chubb.
Best noted: “As part of the transaction, Harbor Point will receive the renewal rights to Chubb Re’s existing reinsurance business, which is comprised primarily of assumed treaty reinsurance for casualty lines. Harbor Point will also write property catastrophe and other short-tail lines of reinsurance business based upon the expected hard market in these lines, which is taking place in the wake of the hurricanes in 2005.
“Chubb will retain responsibility for all liabilities related to business underwritten prior to the establishment of Harbor Point with claims being managed by Harbor Point pursuant to a claims services agreement. Harbor Point is retaining key senior management personnel from Chubb Re’s operations and an existing infrastructure including back office operations, thereby providing for continuity of operations. Additionally, Harbor Point will have the ability to use Federal Insurance Company (100 percent owned by Chubb) paper in the near term until a U.S. platform is acquired and Harbor Point becomes established on ceding companies’ approved listings.”
Best also noted that Harbor Point is led by CEO John Berger, “who has 28 years of reinsurance industry experience, which includes serving as President and chief executive officer of Chubb Re since 1998. Chubb Re has a track record of generating favorable operating results relative to its reinsurance peers.”
Best also indicate, however that “Harbor Point’s strengths are partially offset by increased competition and new capacity brought to market from both established and newly created companies. This additional capacity could dampen expected returns if pricing of reinsurance coverage fails to meet anticipated levels. A.M. Best will closely monitor the quarterly performance of Harbor Point against its stated business plan, and any material negative deviations in terms of management, earnings, capitalization or risk profile could result in downward pressure on the assigned ratings.”
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