Best Affirms Torus Insurance Holdings and Operating Subs Ratings

November 9, 2011

A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of Torus Insurance (Bermuda) Limited, Torus Insurance (UK) Limited and Torus Insurance (Europe) AG, which is based in Lichtenstein. Best also affirmed the ICR of “bbb-” of the group’s ultimate parent holding company, Bermuda-based Torus Insurance Holdings Limited.

In addition, Best affirmed the FSR of ‘A-‘ (Excellent) and ICR of “a-” of Torus Specialty Insurance Company and Torus National Insurance Company, both domiciled in Wilmington, Delaware.

The outlook for all of these ratings remains stable.

Best said the ratings reflect its expectation that “Torus’ consolidated risk-adjusted capitalization will remain strong. Additionally, stand-alone risk-adjusted capitalization at each Torus group subsidiary is expected to remain supportive of its rating level.

“Torus Bermuda operates as the recipient of the majority of the group’s risk through a 65 percent quota share and an aggregate stop loss of Torus UK. In turn, Torus UK provides the same cover to Torus Specialty and Torus National. Torus Bermuda also provides reinsurance support to Torus Europe through a 95 percent quota share arrangement.”

However, Best also noted that the group’s “strong growth, catastrophe losses and the poor performance of excess liability business placed downward pressure on Torus’ risk-adjusted capitalization in 2010.”

But Best also indicated that the “actions taken by management during 2011, including the sale of the renewal rights of the group’s property treaty reinsurance business and the withdrawal from the Bermudian excess liability market, have significantly reduced Torus’ exposure to catastrophe risk and earnings volatility. These actions are expected to support the maintenance of the group’s strong consolidated risk-adjusted capitalization.”

For 2011 Best said it expects Torus “to report a technical loss in excess of $50 million, reflecting its exposure to natural catastrophes in the first half of the year, including the earthquakes in New Zealand and Japan and the Australian floods. Investment income from the group’s conservative portfolio of cash and fixed income investments is likely to be positive but constrained by low interest rates.”

Best described Torus as having “developed a well-diversified specialist portfolio with business written in London, Bermuda, the United States and continental Europe. Expansion has been achieved through a combination of acquisitions and organic growth.

“In 2012, growth will be driven by Lloyd’s Syndicate 1301, which writes an established book of short-tail specialty lines business, including accident and health, property, specie, property schemes and bloodstock. Torus acquired the syndicate’s corporate members, Broadgate Underwriting Limited and Broadgate Underwriting 2010 Limited, in September 2011. In addition, significant growth is anticipated in the U.S. admitted and excess and surplus lines markets, in spite of strong competition from established local insurers.”

Best said it “will continue to closely monitor the performance and reserve development of this U.S. business, particularly in view of the prevailing weak and competitive rating environment and the potential impact of the economic downturn on claims experience.”

Source: A.M. Best

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