A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of “a” of Wind River Reinsurance Company, Ltd. (Wind River Re) (Hamilton, Bermuda) and its U.S. subsidiaries. Concurrently, A.M. Best has affirmed the ICR of “bbb” of Wind River Re’s ultimate parent holding company, Global Indemnity plc (Global Indemnity) (Dublin, Ireland) [NASDAQ: GBLI].
Additionally, A.M. Best has affirmed the indicative ratings on the shelf registration of “bbb” on senior unsecured debt, “bbb-” on subordinated unsecured debt and “bb+” on the preferred stock of Global Indemnity. The outlook for all ratings is stable. (See below for a detailed listing of the companies.)
The ratings for Wind River Re reflect its strong capitalization and financial flexibility; improving underwriting results and its dedication to risk management to better contain catastrophe losses. The company’s strong capital position is reflective of its limited premium base and conservative balance sheet, as well as the support and financial flexibility provided by Global Indemnity. The ratings also recognize the historical profitability of Wind River Re’s U.S. subsidiaries, which operate under one intercompany reinsurance pooling agreement. The U.S. insurance subsidiaries cede 50% of its net retained liabilities to Wind River Re. In 2011, new management deliberately cancelled several unprofitable reinsurance treaties. Wind River Re has repositioned itself in the underwriting of conventional treaty reinsurance, primarily catastrophe-oriented placements and focused on reducing its catastrophe related retentions and reinsurance in the U.S. insurance operations.
These positive attributes are tempered by the organization’s potential exposure to future weather-related events, high underwriting expenses and increasing risk in its investment portfolio. It is unclear as to whether new risk mitigation strategies are adequate to withstand various levels of catastrophes. Nonetheless, management has implemented an enterprise-wide emphasis on premium adequacy and underwriting profitability as well as exiting certain unprofitable classes of business. Expenses seem well-controlled but create the higher than average expense ratio when combined with lower premiums. The company’s equity leverage is growing relatively quickly due to capital appreciation in the recently strong equity markets; however, there are no exposure concentrations.