The ratings reflect Validus Re’s balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Validus Re’s balance sheet strength is supported by risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as a liquid investment portfolio of high quality assets. Furthermore, Validus Re has a history of conservative reserving. The group’s strongest level of capitalization allows it to absorb the catastrophe losses inherent in its businesses. Validus Re’s operating performance has been consistent over the cycle, driven by solid underwriting profits and stable investment returns. The company’s underwriting performance is supported by continued focus on underwriting profit, although volatility is expected during high catastrophe years. The group maintains a well-diversified business profile, focusing on reinsurance. Validus Re has developed, implemented and embedded a risk management framework that appropriately addresses the risks inherent in its profile, and its risk management capabilities generally meet or exceed its risk profile.
Partially offsetting these strengths are Validus Re’s exposure to high-severity events as a property catastrophe-focused reinsurer and the increased competition from capital markets in this space. In addition, any capital actions its parent, American International Group, Inc. (AIG), may take in the future could alter AM Best’s view of capital strength, as well as Validus’ ability to grow profitably. Currently, the company’s risk-adjusted capital remains at levels that have been stress tested to absorb significant catastrophe losses mitigating this concern.
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Source: AM Best