A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of "a-" of Third Point Reinsurance Company (TP Re) (Hamilton, Bermuda) The outlook for both ratings is stable.
The ratings of TP Re are based on its excellent risk-adjusted capitalization, the successful first year implementation of its business plan including the build-out of its management team, as well as the above average performance of its investment portfolio.
Partially offsetting these positive rating factors are the start- up nature of TP Re, the greater investment risk associated with its alternative investment strategy and the increasing competition and capacity in the reinsurance marketplace.
TP Re could be exposed to a convergence of events that could test its capital strength. The underwriting risk along with significant investment risk could have a duplicative adverse effect on its risk- adjusted capital. However, TP Re's low underwriting leverage, experienced underwriting team and its 18-year successful investment track record help to alleviate A.M. Best's concerns. The assets of TP Re will be managed by Third Point LLC, a New York-based SEC- registered investment manager with over $10.1 billion of assets under management. TP Re's assets will be in a separate portfolio within Third Point LLC and will not be combined with other investors at Third Point LLC.
In addition, A.M. Best anticipates that TP Re's management will be challenged by competition from established reinsurers as well as other start-up entities. The addition of more capital to an already overcapitalized reinsurance marketplace could pressure underwriting margins.
Key rating triggers that could result in positive rating actions would be TP Re meeting and/or exceeding its business plan over the long term.
Key rating triggers that could result in negative rating actions would be TP Re not executing its business plan over the long term.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world.
For current Best's Ratings and independent data on the captive and alternative insurance market, please visit ambest.com/captive.
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