Best, S&P See No Change in RenRe Ratings from Channel Re Write Down

Both A.M. Best Co. and Standard & Poor’s Ratings Services have released statements that they see no immediate changes in their respective ratings on RenaissanceRe, following yesterday’s announcement that the Bermuda-based reinsurer would essentially write off its entire investment in Channel Re. (See IJ web site – https://www.insurancejournal.com/news/international/2008/01/17/86507.htm). RenRe valued the holding at $126.7 million as of Sept. 2007.

Best’s issuer credit rating (ICR) and all associated debt ratings for RenaissanceRe Holdings Ltd. is currently “a-“. The Group’s financial strength rating (FSR) is currently ‘A+’ (Superior) and the ICR of the lead company, Renaissance Reinsurance is “aa-“.

Best noted that its “recent upgrading of the FSR and ICR of RenaissanceRe anticipated the devaluation of Channel Re, resulting in a 100 percent risk charge of the investment in the company’s risk-based capital model.”

S&P stated that the “full write down of the investment is appropriate given that Channel Re, a privately held financial guaranty reinsurer, is expected to record fourth-quarter unrealized mark-to-market losses on its financial guaranty contracts that will exceed its GAAP shareholders’ equity.” S&P also said it had “entirely written off the investment in Channel Re and no credit was given in RNR’s risk-adjusted capital adequacy ratio, which is expected to remain extremely strong at year end 2007.”

Both rating agencies also indicated that RenRe’s plans to increase its incurred but not reported (IBNR) reserves by $55 million to reflect estimated losses associated with exposure to sub-prime casualty losses would have no effect on its ratings.

Best said the reserve charge falls well within its expected level of adverse reserve development included in the company’s risk-based capital model.

S&P indicated that the policies involved were “principally written on a claims-made basis and the ultimate losses are expected to be contained within the posted reserves.”

Sources: A.M. Best Co. – www.ambest.com; Standard & Poor’s – www.standardandpoors.com