Best’s News & Research Service - March 22, 2019 01:20 PM (EDT)
AM Best Affirms Credit Ratings of Top Layer Reinsurance Ltd.
- March 22, 2019 01:20 PM (EDT)
Oldwick //BestWire// - AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa-” of Top Layer Reinsurance Ltd. (Top Layer) (Bermuda). The outlook of these Credit Ratings (ratings) remains stable.
These ratings historically have reflected the substantial amount of support Top Layer receives from its co-owners, State Farm Mutual Automobile Insurance Company (State Farm) (currently with an FSR of A++ [Superior] and a Long-Term ICR of “aa+”) and Renaissance Reinsurance Ltd. (RenaissanceRe) (currently with an FSR of A+ [Superior] and a Long-Term ICR of “aa-”). This continues to be the case even as RenaissanceRe’s ultimate parent recently completed a sizeable acquisition.
The ratings of Top Layer reflect its balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, neutral business profile and very strong enterprise risk management (ERM).
The ratings also reflect the significant parental support from State Farm, which provides Top Layer with implicit and explicit support as needed. Top Layer provides State Farm with exposure to non-U.S. high layer reinsurance risk, which is uncorrelated to its own core business.
Since Top Layer’s inception in 1999, it has generated outstanding operating results with only two years of underwriting losses, 2010 and 2011, and performed according to its purpose. This is due to the property catastrophe underwriting expertise of RenaissanceRe, and very few catastrophes significant enough to impact the programs written in Top Layer’s core markets. Top Layer focuses on assuming high excess layers of non-U.S. property catastrophe risks underwritten on a global basis as is best viewed over a long-term horizon. Top Layer maintains a modest amount of on-balance sheet capital relative to the high excess layers of property catastrophe risks it assumes.
The company’s capital profile is rather unique from a qualitative and quantitative perspective, but fundamentally, Top Layer offers clients credit security in the layers of a reinsurance program in which this element is paramount. Top Layer’s capitalization is enhanced through various contractual obligations, resulting in substantial capital support and reinsurance protection from State Farm and, to a much lesser degree, RenaissanceRe. The occurrence of losses will trigger capital calls for State Farm and RenaissanceRe to replenish Top Layer’s capital. Moreover, State Farm provides Top Layer with $3.9 billion excess of $100 million stop-loss reinsurance protection. This coverage is significantly larger than the aggregate exposures Top Layer undertakes in each of its geographic zones.
AM Best acknowledges that Top Layer’s ratings are largely dependent upon the support it receives from State Farm and RenRe. AM Best monitors these companies on an ongoing basis and continues to assess how any developments may impact Top Layer’s ratings.
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 Understanding 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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