A.M. Best has removed from under review with negative implications and affirmed the financial strength rating (FSR) of A- (Excellent) and the issuer credit rating (ICR) of “a-“ of ACP Re Ltd (ACP Re) (Bermuda). Additionally, A.M. Best has removed from under review with positive implications and upgraded the FSRs to A- (Excellent) from B- (Fair) and the ICRs to “a-” from “bb-” of the reinsured members of ACP Re (the former members of the Tower US Pool). (See below for a detailed listing of the companies and ratings). The outlook for all ratings is stable.
In addition, A.M. Best has removed from under review with positive implications and upgraded the FSR to B (Fair) from B- (Fair) and the ICR to “bb” from “bb-”of CastlePoint Reinsurance Company Limited (CastlePoint) (Bermuda). Concurrently, A.M. Best has withdrawn the ratings of CastlePoint due to management’s request to no longer participate in A.M. Best’s interactive rating process.
The rating actions follow the close of ACP Re’s acquisition of the Tower US Pool members, as well as A.M. Best’s completion of the financial impact on ACP Re with regards to Tower’s legacy loss reserve position. These reserves are currently held in CastlePoint, which assumed all loss reserves held by the former members of the Tower US Pool through a loss portfolio transfer.
The ratings of ACP Re reflect its strong risk-adjusted capitalization and experienced management team, which should enable it to successfully handle the run-off of Tower’s legacy reserves.
These positive rating factors are partially offset by uncertainties surrounding the run-off of the acquired loss reserves from the old US Tower Pool, which had developed adversely under prior management. To mitigate this concern, ACP Re entered into a $250 million aggregate stop loss contract with a subsidiary of National General Holdings Corp. [NASDAQ: NGHC], National General Re Ltd. and a subsidiary of AmTrust Financial Services [NASDAQ: AFSI], AmTrust International Insurance Ltd. (AIIL). In addition, ACP Re maintains elevated common stock leverage concentrated in a single publicly traded issuer, which exposes the company’s equity to the vagaries of the equity market or changes in fundamentals at its single largest holding.
The rating actions on the reinsured members of ACP Re reflect the explicit support provided by ACP Re, in the form of an intercompany reinsurance agreement that was executed following regulatory approval.
A.M. Best believes ACP Re is well-positioned at its current ratings. However, factors that could lead to negative rating actions include a material deviation from the company’s submitted strategy and financial projections and a decline in their risk-adjusted capitalization.
The FSRs have been upgraded to A- (Excellent) from B- (Fair) and the ICRs have been upgraded to “a-” from “bb-” and the under review with positive implications status has been removed for the following reinsured members of ACP Re:
- CastlePoint Insurance Company
- CastlePoint National Insurance Company
- CastlePoint Florida Insurance Company
- Tower Insurance Company of New York
- Tower National Insurance Company
- Preserver Insurance Company
- North East Insurance Company
- Hermitage Insurance Company
- York Insurance Company of Maine
- Massachusetts Homeland Insurance Company
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:
- Evaluating Non-Insurance Ultimate Parents
- Insurance Holding Company and Debt Ratings
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding Universal BCAR
- Rating Run-Off Insurers and Specialists
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 © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
Brian O’Larte, 908-439-2200, ext. 5138
Senior Financial Analyst
Michael Lagomarsino, CFA, 908-439-2200, ext. 5810
Assistant Vice President
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations