A.M. Best Co. has affirmed the financial strength rating of A-
(Excellent) and issuer credit rating (ICR) of "a-" of Third Point
Reinsurance Company Ltd. (TPRCL). The outlook for both ratings is
stable. Concurrently, A.M. Best has assigned an ICR of "bbb-" to TPRCL's
holding company, Third Point Reinsurance Ltd. (TP Re)
[NYSE:TPRE]. The outlook assigned to this rating is stable. The ICR of
TP Re is strictly based on the holding company's methodology since it
does not carry any debt. Both companies are domiciled in Hamilton,
The ratings of TPRCL are based on its excellent risk-adjusted
capitalization, continued successful implementation of its business
plan, which includes adherence to financial projections, measured
growth, acceptance in the marketplace (as witnessed by the initial
public offering of the holding company) and the above-average
performance of its investment portfolio. The ratings also consider
TPRCL's seasoned management team and the dynamic and evolving enterprise
risk management that is in place.
Partially offsetting these positive rating factors are the start-up
nature of TPRCL, the greater investment risk associated with its
alternative investment strategy and the increasing competition and
capacity in the reinsurance marketplace.
TPRCL could be expoed to a convergence of events that could test its
capital strength. The underwriting risk along with significant
investment risk could have a duplicative adverse effect on its
risk-adjusted capital. However, TPRCL's low underwriting leverage,
experienced underwriting team and its investment manager's 19-year
successful investment track record help to alleviate A.M. Best's
concerns. The assets of TPRCL are managed by Third Point LLC, a New
York-based SEC-registered investment manager with over $12.1 billion of
assets under management. TPRCL's assets are in a separate portfolio
managed by Third Point LLC, which are not combined with assets of other
investors at Third Point LLC.
In addition, A.M. Best anticipates that TPRCL's management will be
challenged by competition from established reinsurers as well as other
start-up entities. The addition of more capital to an already
overcapitalized reinsurance marketplace could pressure underwriting
Key rating triggers that could result in positive rating actions would
be TPRCL meeting and/or exceeding its business plan over the long term,
maintenance of robust risk capital levels and positive operating
performance through market cycles.
Key rating triggers that could result in negative rating actions would
be TPRCL not executing its business plan over the long term, significant
adverse reserve development, outsized investment losses and/or a
departure of key management.
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.
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
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