A.M. Best has assigned a financial strength rating of A- (Excellent) and an issuer credit rating of “a-” to Kelvin Re Limited (Guernsey). The outlook assigned to both ratings is stable.
The ratings reflect Kelvin Re’s strong capitalization, diversified projected business profile within the natural catastrophe reinsurance market, experienced management and well-designed risk management function. Offsetting rating factors include the challenges related to the tactical execution of its proposed business plan in a soft market and the increased investment risk brought on by a non-traditional investment strategy.
Kelvin Re’s risk-adjusted capitalization is expected to be maintained at an excellent level, supported by moderate projected underwriting leverage, a reinsurance program of good credit quality and a contingent capital facility (Letter of Credit). Underwriting, reserving and risk management functions are outsourced to market-leading providers and the company’s board of directors is largely formed by individuals with relevant reinsurance industry experience.
Kelvin Re is a privately owned start-up company based in Guernsey, providing short-tail property and specialty lines reinsurance. It follows a non-traditional investment strategy with 50 percent of investments allocated to blue chip hedge funds. The company intends to build a globally diversified reinsurance portfolio focused on property catastrophe. In its first year of operation, it is anticipated that Kelvin Re will establish a globally diversified reinsurance portfolio, with gross written premiums in the region of $100 million, of which around two-thirds is expected to relate to non-proportional catastrophe risks. The company’s gross premium revenue is likely to annually increase by approximately 10 percent in subsequent years and operating performance over the next two years is likely to be solid.
Kelvin Re has partnered with third parties for its management function. The company’s management team has demonstrated a successful track record of performance in what constitutes Kelvin Re’s core business. Kelvin Re demonstrates a commitment to an organic culture of enterprise risk management (ERM). The company has established an ERM committee that is expected to employ strong controls and monitoring capabilities to support risk surveillance and management, ensuring the application of risk policies decided at board level.
Negative rating actions could occur if the business plan falls below expectations and if the investment book deteriorates materially. Positive rating actions are unlikely in the near term.
Source: A.M. Best
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