A.M. Best Affirms Top Layer Reinsurance Ltd.

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co.has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit rating (ICR) of “aa-” of Top Layer Reinsurance Ltd. (Top Layer)(Hamilton, Bermuda). The outlook for both ratings is stable.

The ratings reflect the substantial amount of support Top Layer receives from its co-owners, State Farm Mutual Automobile Insurance Company (State Farm) (currently with an FSR of A++ [Superior] and an ICR of “aa+”) and Renaissance Reinsurance Ltd. (RenRe) (currently with an FSR of A+ [Superior] and an ICR of “aa-”).

Since Top Layer’s inception in 1999, the company has generated outstanding operating results, which are due to the property catastrophe underwriting expertise of RenRe, combined with very few catastrophes significant enough to impact the programs written in Top Layer’s core markets. Top Layer’s business scope is limited to the assumption of high excess layers of non-U.S. property catastrophe risks underwritten on a global basis. The company experienced its first and second loss years in its history in 2010 and 2011, and it has performed in line with how it was designed.

Top Layer maintains a modest amount of on-balance sheet capital relative to the high excess layers of property catastrophe risks it assumes. The company’s capital profile is rather unique from a qualitative and quantitative perspective, but fundamentally Top Layer offers clients credit security in the layers of a reinsurance program where credit security is paramount. Top Layer’s capitalization is enhanced through various contractual obligations, resulting in substantial capital support and reinsurance protection from State Farm and, to a much lesser degree, RenRe. The occurrence of losses will trigger capital calls for State Farm and RenRe to replenish Top Layer’s capital. Moreover, State Farm provides Top Layer with $3.9 billion excess of $100 million stop-loss reinsurance protection. This coverage is significantly larger than the aggregate exposures Top Layer undertakes in each of its geographic zones.

A.M. Best acknowledges that Top Layer’s ratings are largely dependent upon the support it receives from State Farm and RenRe. A.M. Best monitors these companies on an ongoing basis and continues to assess how any developments may impact Top Layer’s ratings.

Factors that could result in a revision of Top Layer’s outlook to positive or an upgrading of its ratings are a continuation of very long-term profitability and a continuation of support from its owners. Factors that could lead to a revision of the outlook to negative or a downgrading of the ratings would be an increased frequency of losses that would cause A.M. Best to question the strategy or risk management, and if RenRe/State Farm reduce their commitment to Top Layer.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding Universal BCAR for Property/Casualty Insurers”; “Catastrophe Analysis in A.M. Best Ratings”; and “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Co.
Greg Reisner
Senior Financial Analyst
908-439-2200, ext. 5224
[email protected]
Peter Dickey
Assistant Vice President
908-439-2200, ext. 5053
[email protected]
Rachelle Morrow
Senior Manager, Public Relations
908-439-2200, ext. 5378
[email protected]
Jim Peavy
Assistant Vice President, Public Relations
908-439-2200, ext. 5644
[email protected]

Source: A.M. Best Co.