A.M. Best Co. has assigned a financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” to newly established, Bermuda-based, S.A.C. Re, Ltd., both with stable outlooks.
The ratings for SAC Re are based on its “excellent risk-adjusted capitalization, knowledgeable management team and prudent business plan,” said Best
However, as partial offsetting factors Best cited the “start-up nature of the company, the greater investment risk associated with an alternative investment strategy, as well as the increased competition in the reinsurance marketplace that may challenge some of the company’s business plans.”
Best said it is “concerned that there is a possibility that SAC Re could be exposed to a convergence of events due to the adjoining of underwriting risk and the present risk in an alternative investment strategy. These risks could have an adverse affect on the company’s risk-adjusted capital.”
However, Best also indicated that SAC Re’s “low underwriting leverage, experienced underwriting team, partially hedged nature of the portfolio along with its investment manager’s lengthy investment track record help mitigate these concerns.
“The assets of SAC Re will be managed by S.A.C. Capital Advisors, L.P., a global firm based in Connecticut, the predecessor of which was founded in 1992 by Steven A. Cohen. SAC Re’s assets will be invested in a separate investment fund managed by S.A.C. Capital Advisors, L.P., which will primarily invest in other investment funds managed by S.A.C. Capital Advisors, L.P. and its affiliates.”
Best also said it “anticipates that SAC Re’s management will be challenged by competition from established reinsurers as well as other start-up entities. The addition of more capacity to an already overcapitalized reinsurance marketplace could pressure underwriting margins.
“Key rating triggers that could result in positive rating actions would be SAC Re’s meeting and/or exceeding its business plan over the long term.
“Key rating triggers that could result in negative rating actions would be SAC Re not executing its business plan over the long term.”
Source: A.M. Best
Was this article valuable?
Here are more articles you may enjoy.