A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of Flagstone Reassurance Suisse SA and its reassured affiliate, Flagstone Alliance Insurance and Reinsurance plc, which is based in Cyprus, as well as the ICR of “bbb-” of Bermuda-based Flagstone Reinsurance Holdings Limited (collectively referred to as Flagstone Re).
Best also affirmed the indicative debt ratings of “bb” on preferred stock, “bb+” on subordinated debt and “bbb-” on senior debt for securities available under Flagstone Reinsurance Holdings Limited’s shelf registration.
The outlook for all of the ratings is stable.
The ratings reflect Flagstone Re’s “excellent level of risk-based capitalization, solid underwriting performance, experienced management team, its well developed business franchise and its reasonably diversified business profile,” said Best “The ratings also are supported by the significant investments made in technical and human assets, which support the operating activities of the organization. Additionally, the ratings recognize the group’s conservative operating strategies and solid enterprise risk management framework, which has resulted in solid underwriting results.”
As offsetting factors Best cited “the volatility of Flagstone Re’s operating performance resulting in a modified its investment strategy and underwriting appetite. The multiple acquisitions that the company has made since inception have been integrated and are expected to enhance the value of the overall organization.”
Best explained that the stable ratings outlook reflects its expectation that “Flagstone Re’s overall performance will remain supportive of the required capitalization levels given its reduced risk appetite coupled with the underwriting environment in the property catastrophe exposure lines of business.
“Flagstone Re’s reduced risk appetite is evidenced by a lower return on equity target, modeling of investment risk using a more conservative technique and placing a cap on the percentage of allocation to equity investments. Total returns will be primarily driven by underwriting results as investment risk has been substantially reduced. Given the demands on underwriting performance, the outlook is reflective of Flagstone Re’s demonstrated underwriting acumen with loss and combined ratios, which compare favorably to its peers.
“A significant shift in operating or investment strategies may influence A.M. Best’s future expectations.”
Source: A.M. Best
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