A.M. Best has affirmed the financial strength rating of A-
(Excellent) and issuer credit ratings of "a-" of PaCRe, Ltd.
(PaCRe) (Hamilton, Bermuda). The outlook for both ratings is stable.
The ratings reflect PaCRe's excellent risk-adjusted capitalization as
measured by Best's Capital Adequacy Ratio (BCAR), its experienced
underwriting team, and independent management by AlphaCat Managers Ltd.,
a business unit within Validus Holdings, Ltd. Additionally,
PaCRe's ratings are based on the overall business plan of writing upper
layer property catastrophe business combined with assets managed by the
investment expertise of Paulson & Company Inc. Positive underwriting
performance for PaCRe's first two years in business were negatively
impacted by unrealized investment losses as the result of macroeconomic
Partially offsetting these positive rating factors is the start-up
nature of PaCRe along with the greater investment risk that is
associated with this type of investment strategy. In addition, PaCRe's
business plan will be challenged by established reinsurers as well as
otheralternative investment reinsurers entering the market, and more
capacity into an already overcapitalized reinsurance marketplace could
pressure underwriting margins.
Although A.M. Best is concerned about the possibility of PaCRe being
exposed to a simultaneous adverse underwriting and asset event, this
concern is mitigated by its low underwriting leverage, strong
capitalization, as well as the strength of Validus Holdings, Ltd.'s
underwriting performance and Paulson & Company Inc.'s 20-year successful
investment track record. The assets of PaCRe are managed by Paulson &
Company, a New York-based, SEC-registered, multi-strategy event
arbitrage investment advisor.
Rating factors that could result in positive rating actions would be
PaCRe meeting and/or exceeding its business plan over the long term.
Rating factors that could result in negative rating actions would be
PaCRe not executing its business plan over the long term and/or if the
company experiences outsized underwriting or investment losses.
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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