RenRe and subsidiaries get positive outlooks from AM Best

Credit ratings agency AM Best has revised the outlooks of Renaissance Reinsurance Ltd. (RenRe) and its subsidiaries to positive from stable for the Long-Term Issuer Credit Ratings (Long-Term ICRs), and affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term ICRs of “aa-” (Superior).

The subsidiaries include Renaissance Reinsurance U.S. Inc., RenaissanceRe Specialty U.S. Ltd., Renaissance Reinsurance of Europe Designated Activity Company, and RenaissanceRe Europe AG. The outlook of the FSR is stable.

AM Best has revised the outlook of RenaissanceRe Holdings Ltd. to positive from stable and affirmed the Long-Term ICR of “a-” (Excellent), and the FSR of A (Excellent) and the Long-Term ICR of “a+” (Excellent) for DaVinci Reinsurance Ltd. and the Long-Term ICR of “bbb+” (Good) of DaVinciRe Holdings Ltd.

Concurrently, AM Best has affirmed Vermeer Reinsurance Ltd.’s FSR of A (Excellent) and the Long-Term ICR of “a+” (Excellent) with the outlook of these ratings being stable.

AM Best’s ratings reflect RenRe’s balance sheet strength, which has been assessed as strongest, its adequate operating performance, “very favorable business profile, and enterprise risk management.”

According to the rating agency, despite elevated global catastrophes, RenRe’s operating performance has improved substantially in recent years in terms of dampened volatility as its specialty and casualty lines have earned into the portfolio, which is supported by the volatility produced by the property catastrophe core of its writings.

AM Best said, “Despite the continuation of elevated global catastrophe activity in recent years, RenaissanceRe has produced very strong operating performance from underwriting and fee generation.

“Looking forward, RenaissanceRe appears well-positioned to benefit from continued, largely favorable overall market conditions in the global reinsurance space. Lastly, investment returns have increased significantly as RenaissanceRe’s relatively short-duration, fixed-income portfolio experienced a marked increase in yield as maturing issuances were reinvested at higher yields.”

However, RenRe’s growth in casualty lines exposes it to potential reserve volatility, although according to AM Best the company possesses reinsurance protection that would “absorb a portion of any adverse development on a portion of its legacy reserves should that transpire.”

AM Best’s assessment of RenRe’s overall balance sheet strength considers the positive impact of the financial flexibility provided by its ultimate parent, RNR, which typically maintains significant capital at the holding company level. RNR has consistently demonstrated its ability to raise capital through the public and private equity markets, and the public debt markets.

The Bermuda-based reinsurer’s ability to attract and deploy capital during favorable and challenging market cycles is an important consideration in AM Best’s assessment of the enterprise’s overall balance sheet strength, and the individual balance sheet assessments of its operating companies.