A.M. Best has assigned a financial strength rating (FSR) of A- (Excellent) and an issuer credit rating (ICR) of “a-” to Third Point Reinsurance (USA) Ltd. (TPRUSA) (Bermuda) and an ICR of “bbb-” to its parent, Third Point Re (USA) Holdings, Inc. (Wilmington, DE). The outlook assigned to the ratings is stable.
The ratings of TPRUSA are based on its strong risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), its experienced management team and broad-based business plan. Furthermore, the ratings recognize the support TPRUSA receives from Third Point Reinsurance Ltd (TPRE), its ultimate parent, and Third Point Reinsurance Company Ltd. (TPRCL), its affiliate. Partially offsetting these positive rating factors are the start-up nature of the company and the risks associated with the company's hedged investment strategy, managed by Third Point LLC (Third Point), which A.M. Best believes creates an elevated risk profile. Nonetheless, the skilled underwriting team coupled with the investment expertise of Third Point together with the investment returns may mitigate these risks.
A.M. Best is concerned that TPRUSA's management team may be challenged by the increased competition from established carriers as well as other alternative capital insurers, also in the start-up phase.
Key rating drivers that could result in positive rating actions would be TPRUSA meeting or exceeding its business plan. Negative rating actions could occur if TPRUSA fails to execute its business plan or if the company experiences erosion in capital due to outsized underwriting or investment losses. The companies’ ratings are tied to the rating of TPRE; therefore, unfavorable performance or material loss of capital could result in rating pressure for TPRUSA and Third Point Re (USA) Holdings, Inc.
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. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- Catastrophe Analysis in A.M. Best Ratings
- Evaluating Country Risk
- Rating Members of Insurance Groups
- Rating New Company Formations
- Risk Management and the Rating Process for Insurance Companies
- Understanding Universal BCAR
- Insurance Holding Company and Debt Ratings
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.
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