AM Best has assigned a Financial Strength Rating of A (Excellent) and a Long-Term Issuer Credit Rating of "a" (Excellent) to Nectaris Re Ltd. (Nectaris Re), the operating subsidiary of Nectaris Holdings Ltd. (both domiciled in Bermuda). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Nectaris Re’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
According to Nectaris Re’s business plan, the company’s business strategy is to retrocede all of its business to Horseshoe Re II Limited segregated accounts company (Horseshoe Re II) with cells that are funded by insurance-linked securities funds managed by Leadenhall Capital Partners LLP (Leadenhall). Leadenhall is a subsidiary of Mitsui Sumitomo Insurance Company, Limited (a subsidiary of MS&AD Insurance Group Holdings, Inc. or MS&AD). Leadenhall, which has a Mutual Cooperation Agreement with Nectaris Re, has had a book of business built since its inception in 2008.
The business written via MS Amlin (which is expected to account for approximately 90% of total limits ceded to Nectaris Re) will be 100% retroceded to Horseshoe Re II on a fully collateralized basis. Collateral will be provided by Horseshoe Re II at the 1-in-1,000 aggregate exceedance probability (AEP) return period, with the associated tail risk retained by MS Amlin. MS Amlin’s ultimate parent is MS&AD. All other business ceded to Horseshoe Re II will be collateralized at the 1-in-2,000 AEP return period, with the associated tail risk retained by Nectaris Re. Collateral provided by Horseshoe Re II, which will comprise of cash and highly rated short-term assets, will be held in trust accounts for the benefit of Nectaris Re.
AM Best projects Nectaris Re’s risk-adjusted capital, as measured by Best’s Capital Adequacy Ratio (BCAR), to remain at the strongest level over the near term (i.e., one to three years). Its liquidity and quality of assets provide ample support of its balance sheet strength assessment. Partially offsetting these rating factors is Nectaris Re’s relatively high dependency on third-party retrocession. However, all retrocession ceded limits will be written on a collateralized basis, thus minimizing its counterparty risk. The ratio of the tail risk retained by Nectaris Re to its equity is expected to be low.
AM Best assesses Nectaris Re’s overall operating performance as adequate based upon the historical operating results of Leadenhall-managed funds, projected results of the retained tail risk and income from ceding commissions. The company’s pricing strategy is to focus on underwriting profits and not on asset returns.
AM Best assesses Nectaris Re’s business profile as limited, as the company predominantly writes property catastrophe reinsurance contracts and some casualty and marine risk. Product concentration is mitigated somewhat by risk diversification across regions, perils and the number of MS Amlin’s cedants. Pricing sophistication and modeling capabilities, including reliance on vendor models and independent modeling tools, creates a favorable environment for management to execute its pricing strategy.
Due to Nectaris Re’s Mutual Cooperation Agreement with Leadenhall, AM Best assesses the company’s ERM capabilities as appropriate for its risk profile.
This press release relates to Credit Ratings that have been published on AM 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 see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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