Ratings Roundup: Peak Re, Lakeside Re III Ltd

December 31, 2012

A.M. Best Co. has assigned a financial strength rating of ‘A’- (Excellent) and issuer credit rating of “a-” to Hong Kong-based Peak Reinsurance Company Limited, both with stable outlooks. Best explained that “Peak Re is licensed in Hong Kong as a general reinsurer with a focus on the Asia Pacific region. With initial capital of US$550 million, the company is 85.1 percent owned by Fosun International Limited and 14.9 percent owned by International Financial Corporation. Fosun is a Hong Kong listed conglomerate with operations and investments in pharmaceuticals and healthcare, property, steel, mining, retail, services and insurance businesses in Mainland China.” Best said its ratings of Peak Re “are based on its sound risk-adjusted capitalization and its prudent business plan. The assumptions used in the company’s business plan are in line with the average of regional reinsurers. Peak Re’s net underwriting leverage is anticipated to remain below one times over the next five years.” As partial offsetting factors Best cited the “start-up nature of Peak Re and the challenge it faces to execute its business plan under the increasing competition from both the established reinsurers as well as other new entries within the region. Moreover, Peak Re could potentially be exposed to a frequency of events that will pressure its capital strength during its early years of operation.” Best added, however, that “Peak Re is well positioned at its assigned ratings over the near term. Factors that may trigger negative rating actions include significant adverse deviation of its risk-adjusted capital relative to its business plan and failure to execute its business plan or meet its planned underwriting performance.”

Standard & Poor’s Ratings Services has assigned its ‘B+(sf)’ rating to the $270 million variable rate principal at risk notes due 2016 issued by Lakeside Re III Ltd. S&P said the “notes cover losses in the Canadian provinces of Alberta, British Columbia, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, and Quebec, as well as the U.S. states of Arkansas, California, Illinois, Indiana, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Ohio, Oregon, Tennessee, Washington, and Wisconsin, from earthquake and ensuing damage caused by related earth shake, fire, sprinkler leakage, volcanic disturbance or eruption, tsunami, and flooding due to dam or levee ruptures on an annual aggregate basis.” Credit analyst Gary Martucci added that the “rating is based on the lowest of the following: the rating on the catastrophe risk (‘B+’); the rating on the assets in the collateral account (‘AAAm’); and the rating on the ceding insurer (‘AA-‘).”

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