A.M. Best Assigns Ratings to Lion Reinsurance Company Limited

A.M. Best Co. has assigned a financial strength rating of A- (Excellent) and issuer credit rating of “a-” to Lion Reinsurance Company Limited (Lion Re) (Bermuda). The outlook assigned to both ratings is stable.

The ratings reflect Lion Re’s excellent initial capitalization, conservative operating strategy and explicit parental support. The ratings also consider Lion Re’s strategic role as a captive reinsurer of ASSA Tenedora, S.A., a subsidiary of Grupo ASSA, S.A., a publicly traded holding company on the Panama stock exchange.

Also inuring to the rating is a sound business plan, upon which the profitability and liquidity measures of this rating are based. The rating is supported by an amount of capital that meets A.M. Best’s requirements for newly formed companies as measured by Best’s Capital Adequacy Ratio (BCAR). Lion Re will operate as a Bermuda-based reinsurer focused on writing a combination of property, casualty, health and group life business from affiliated insurers.

These positive rating factors are partially offset by execution risk due to the unproven start-up nature of the company.

Drivers that could lead to a positive outlook or rating upgrade are stable underwriting performance, as well as reduced overall net exposure over the next few years and successful implementation of the business plan.

Factors that could lead to a negative outlook or a rating downgrade are material loss of capital from either claims or investments, a reduced level of capital that does not support the rating, or an increase in net retention. Lion Re’s rating is tied to AM Best’s internal assessment of Grupo ASSA, S.A.; therefore, unfavorable operating performance or material loss of capital could result in changes to the captive’s rating. In addition, A.M. Best will closely monitor Lion Re’s progress against its business plan, which was used to assess the initial rating. Material and/or adverse deviation from this plan would likely result in downward pressure on the initial rating.

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 Credit Ratings and independent data on the captive and alternative insurance market, please visit http://www.ambest.com/captive.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding Universal BCAR”; “Catastrophe Analysis in A.M. Best Ratings”; “Rating Members of Insurance Groups”; “Assessing Country Risk”; and “Alternative Risk Transfer (ART).” Methodologies can be found at http://www.ambest.com/ratings/methodology.