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TMCNet:  A.M. Best Removes Ratings of Hamilton Re, Ltd. From Under Review

[December 23, 2013]

A.M. Best Removes Ratings of Hamilton Re, Ltd. From Under Review

OLDWICK, N.J. --(Business Wire)--

A.M. Best Co. has removed from under review with negative implications and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of "a-" of Hamilton Re, Ltd. (Hamilton Re) (Hamilton, Bermuda), formerly S.A.C. Re, Ltd. (SAC Re) (Hamilton, Bermuda). The outlook assigned to both ratings is stable.

The ratings of Hamilton Re are based on its excellent risk-adjusted capitalization, knowledgeable management team and prudent business plan. Partially offsetting these positive rating factors are the start-up nature of the company, the greater investment risk associated with an alternative investment strategy, as well as the increased competition in the reinsurance marketplace that may challenge some of the company's business plans.

A.M. Best is concerned there is a possibility that Hamilton could be exposed to a convergence of events due to the adjoining of underwriting risk and the present risk in an alternative investment strategy. Also of concern is the relatively high gross investment leverage used by Two Sigma Investments (TSI (News - Alert)) which is higher than other alternative investment strategies. These risks could have an adverse effect on the company's risk-adjusted capital. However, these risks are mitigated by Hamilton's low underwritingleverage and experienced underwriting team. The investment leverage concerns are mitigated by the partially hedged nature of the portfolio, the large number of diversified liquid investments, and the investment manager's lengthy investment track record.


The assets of Hamilton will be managed by TSI, a global firm based in New York, NY, which was founded in July of 2001 by John Overdeck and David Siegel. Hamilton's assets will be invested in a dedicated "fund of one" which allocates capital to two different trading entities.. These entities apply various strategies to invest in liquid investments in the global equity, futures, FX and derivatives markets.

In addition, A.M. Best anticipates that Hamilton's management will be challenged by competition from established reinsurers as well as other start-up entities. The addition of more capacity to an already overcapitalized reinsurance marketplace could pressure underwriting margins.

Key rating triggers that could result in positive rating actions would be steady growth of surplus through investments and underwriting, and meeting and/or exceeding the business plan over the long term.

Key rating triggers that could result in negative rating actions would be not executing the business plan over the long term, and/or having large losses that would reduce risk adjusted capital.

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 © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


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