A.M. Best Places Ratings of Flagstone Reinsurance Africa Limited Under Review With Developing Implications

LONDON--(BUSINESS WIRE)-- A.M. Best Europe – Rating Services Ltd. has placed under review with developing implications the financial strength rating of A- (Excellent) and issuer credit rating of ”a-” of Flagstone Reinsurance Africa Limited(FReA) (South Africa). FReA is the wholly owned subsidiary of Flagstone Reassurance Suisse S.A(Flagstone Suisse) (Switzerland), which is ultimately owned by Flagstone Reinsurance Holdings SA (Flagstone Re) (Luxembourg) (collectively referred to as Flagstone).

These actions follow the recent announcement that Flagstone Re and Validus Holdings, Ltd. (Validus) have entered into a definitive merger agreement in which Validus will acquire all of the issued and outstanding shares of Flagstone.

The under review status reflects the uncertainty associated with Validus’ future plans regarding Flagstone Re and ultimately FReA.

FReA’s ratings were removed from under review with negative implications and affirmed on 22 May 2012 with a negative outlook. Those rating actions reflected A.M. Best’s opinion that Flagstone Suisse remains committed to supporting the obligations of FReA. FReA benefits from a 100% quota share arrangement with Flagstone Suisse, which protects all its obligations arising from contracts written since July 2008. The company also receives financial support through a comprehensive parental guarantee. Parental support has been the key factor in the ratings of FReA since its acquisition in 2008.

FReA ceased underwriting new business in October 2011, effectively placing the company into run off.

The ratings will remain under review pending the completion of the transaction and A.M. Best’s continuing discussions with management relative to the future plans for the Flagstone legal entities.

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 utilised include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding Universal BCAR”; “Catastrophe Analysis in A.M. Best Ratings”; “Insurance Holding Company and Debt Ratings”; and “Rating Members of Insurance Groups”. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company.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 Company
<b>Anna Bender, +(44) 20 7397 0306
Financial Analyst
[email protected]
or
Carlos Wong-Fupuy, +(44) 20 7397 0287
Senior Director, Analytics
[email protected]
or
Rachelle Morrow, +(1) 908 439 2200, ext. 5378
Senior Manager, Public Relations
[email protected]
or
Jim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best Europe – Rating Services Ltd.