A.M. Best Affirms Ratings of Kelvin Re Limited

LONDON--(BUSINESS WIRE)-- A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of “a-” of Kelvin Re Limited (Kelvin Re) (Guernsey). The outlook for both ratings is stable.

The ratings reflect Kelvin Re’s strong risk-adjusted capitalisation, diversified portfolio within the natural catastrophe reinsurance spectrum and the company’s comprehensive enterprise risk management (ERM) framework. Partially offsetting rating factors include the ongoing challenges related to the current conditions in the reinsurance market and the increased investment risk brought on by a non-traditional investment strategy, with circa 50% of investments allocated to blue-chip hedge funds.

During its first year of operation, the company has generated a globally diversified portfolio of natural catastrophe reinsurance exposures whilst maintaining a strong level of risk-adjusted capitalisation. Kelvin Re has underwritten in excess of USD 120 million of gross premiums during the first three quarters of 2015 using the distribution reach of a leading insurance-linked securities (ILS) originator. In addition, the entity has established a comprehensive ERM framework and a flexible retrocession program with quality reinsurance counterparties to continue supporting the execution of its medium-term plan.

Despite the company meeting expectations in its first year of operation, current soft market conditions driven by excess capacity increase the expected volatility of operating earnings, which results in enlarged execution risk. Moreover, Kelvin Re’s investment in hedge funds results in a potential reduction in liquidity and increased investment risk. However, these risks are partially offset by alternative sources of liquidity and a thorough ERM framework.

Kelvin Re is a privately owned start-up company based in Guernsey, providing short-tail property and specialty lines reinsurance. The company follows a non-traditional investment strategy and is focused on building a globally diversified reinsurance portfolio with underwriting emphasis placed on property catastrophe business. Kelvin Re has partnered with third parties for its management function and demonstrates a commitment to an organic culture of ERM.

Positive rating actions could occur if Kelvin Re continues to successfully execute its business plan whilst maintaining strong levels of risk-adjusted capitalisation.

Negative rating actions could occur if there were a substantial deterioration of Kelvin Re’s risk-adjusted capitalisation or if the distribution agreement with the ILS originator is discontinued effectively stopping new business origination. Additionally, negative rating pressures may arise due to an increase in the volatility of the company’s investment portfolio.

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.

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.

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 © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151113005726/en/

A.M. Best Company, Inc.
Pablo Vasquez, +(44) 20 7397 0311
Financial Analyst
[email protected]
or
Tim Prince, +(44) 20 7397 0320
Associate Director, Analytics
[email protected]
or
Christopher Sharkey, +(1) 908 439 2200, ext. 5159
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 Company, Inc.

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