|[July 02, 2014]
A.M. Best Affirms Ratings of Top Layer Reinsurance Ltd.
OLDWICK, N.J. --(Business Wire)--
A.M. Best has affirmed the financial strength rating (FSR) of A+
(Superior) and the issuer credit rating (ICR) of "aa-" of Top Layer
Reinsurance Ltd. (Top Layer) (Hamilton, Bermuda). The outlook for
both ratings is stable.
The ratings reflect the substantial amount of support Top Layer receives
from its co-owners, State Farm Mutual Automobile Insurance Company
(State Farm), which currently has an FSR of A++ (Superior) and an ICR of
"aa+," and Renaissance Reinsurance Ltd. (RenRe), which currently
has an FSR of A+ (Superior) and an ICR of "aa-."
Since Top Layer's inception in 1999, it has generated outstanding
operating results, which are due to the property catastrophe
underwriting expertise of RenRe, combined with very few catastrophes
significant enough to impact the programs written in Top Layer's core
markets. Top Layer's business scope is limited to the assumption of high
excess layers of non-U.S. property catastrophe risks underwritten on a
global basis, and is best viewed over a long-term time horizon. Despite
the company's first underwriting loss ever in 2010, which was followed
by an underwriting loss again in 2011, Top Layer has performed in line
with how it was designed.
Top Layer maintains a modest amount of on-balance sheet capital relative
to the high excess layers of property catastrphe 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 where credit
security 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, RenRe. The occurrence of losses will trigger calls for State
Farm and RenRe 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.
A.M. Best acknowledges that Top Layer's ratings are largely dependent
upon the support it receives from State Farm and RenRe. A.M. Best
monitors these companies on an ongoing basis and continues to assess how
any developments may impact Top Layer's ratings.
Factors that could result in an upgrading of Top Layer's ratings or a
positive outlook are a continuation of its very long-term profitability
and a continuation of support from its owners. Factors that could lead
to a downgrading of the company's or revision of its outlook to negative
include an increased frequency of losses that would cause A.M. Best to
question the strategy or risk management and if RenRe and/or State Farm
reduce their commitment to Top Layer.
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Best's Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS
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