Best Affirms Max Re’s ‘A-‘ Ratings

A.M. Best Co. announced that it has affirmed the financial strength rating of “A-” (Excellent) of Bermuda-based Max Re Ltd., a wholly owned subsidiary of Max Re Capital Ltd., with a stable outlook.

“The rating reflects Max Re’s secure risk-adjusted capitalization, experienced and effective executive management and underwriting teams, prudent approach to managing alternative investments and integrated approach to enterprise risk management,” said Best. “Offsetting these advantages in part is the company’s aggressive expansion through 2003 into more traditional casualty lines of insurance and reinsurance, which have supplanted finite risk reinsurance as the primary source of new business.”

The rating agency stressed that: “A group of highly experienced senior underwriters have joined Max Re to manage the shift to more traditional lines of business, in response to the attractive premium rates in the property/casualty market. As investment yields have remained low, finite risk business has become relatively less attractive — given the importance of investment spreads to that line’s profitability — prompting Max Re’s shift to traditional lines of business.” Best said it would “monitor the development of the new businesses, particularly in respect to management’s assumptions for pricing and reserves.”

It also noted that “Max Re’s alternative investments are highly diversified, well managed and represent the company’s surplus.” Best said, however that it recognized “the potential volatility associated with this asset class,” and would therefore “continue to monitor Max Re’s sophisticated process for managing underwriting and investment risks, which permits it effectively to optimize the use of capital.”