Best Affirms New Castle Re Ratings

A.M. Best Co. has affirmed the financial strength rating (FSR) of “A-” (Excellent) and the issuer credit rating (ICR) of “a-” of Bermuda-based New Castle Reinsurance Company Ltd., and assigned an ICR of “bbb-” to New Castle Reinsurance Holdings Ltd. The outlook for all ratings is stable.

“The rating affirmations reflect New Castle Re’s solid capitalization, continued enhancement of its infrastructure, in particular its risk and contract recording systems, as well as the execution of its business plans that were presented to A.M. Best during the initial rating process last year,” said the bulletin.

“In addition to meeting A.M. Best’s previously established requirements for new company formations, the initial rating assignment of New Castle Re also reflects its ability to meet A.M. Best’s stricter risk-based capital requirements for property catastrophe companies,” it continued. “These more stringent requirements require a more conservative level of risk-based capital to support a company’s assigned rating. Additionally, New Castle Re’s risk-based capital is further enhanced by a financial guaranty provided by its sponsor, the Citadel Investment Group, which is one of the largest hedge funds in its industry.”

Best noted that as part of the new company formation monitoring process, New Castle Re’s management has kept the rating agency fully apprised of the Company’s progress. “Overall, New Castle Re has adhered to its initial business plan with first year premium volume in line with expectations and risk-based capital fully supportive of its current rating level,” Best indicated. “Moreover, management and staff have been further strengthened with the addition of experienced personnel.

“In addition to being susceptible to low frequency, high severity events, A.M. Best anticipates that New Castle Re will continue to be challenged by increased competition from established companies, sidecars and potential new start-ups seeking to enter the industry. The additional capacity brought to the market could dampen expected returns if pricing of reinsurance coverage fails to meet anticipated levels. Furthermore, the ability of New Castle Re to effectively build and retain market acceptance will only be proven over time.”