AM Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” (Excellent) for Brit Reinsurance (Bermuda) Limited (Brit Re), based in Bermuda. The outlook for both ratings remains stable.
The ratings reflect Brit Re’s balance sheet strength, which AM Best categorizes as very strong, along with its adequate operating performance, limited business profile, and appropriate enterprise risk management (ERM).
Additionally, Brit Re benefits from both implicit and explicit support from its intermediate parent, Brit Limited, and its ultimate parent, Fairfax Financial Holdings Limited (Fairfax).
Brit Re primarily functions as an internal reinsurer for its affiliates, Lloyd’s Syndicate 2987 and Brit UW Limited. In 2024, the company introduced a new growth strategy to expand its third-party property/casualty and specialty reinsurance lines outside of the Brit Group.
Despite this diversification effort, most of Brit Re’s premium income still originates from a quota share contract with Syndicate 2987.
Brit Re maintains risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). However, its material catastrophe exposure from Syndicate 2987 and the limited fungibility of some invested assets supporting Lloyd’s operations factor into the overall balance sheet assessment.
A significant portion of Brit Re’s assets is pledged as collateral for a stop-loss contract to provide Funds at Lloyd’s (FAL) for Brit.
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Dividend payments to its intermediate parent within the Fairfax group further constrain Brit Re’s capital growth. AM Best notes that the combination of significant third-party business growth and continued dividend payouts could potentially reduce Brit Re’s risk-adjusted capitalization.
Despite this, AM Best expects capitalization levels to remain supportive of the very strong balance sheet strength assessment.
Brit Re’s operating performance is deemed adequate, primarily driven by its 20% quota share of net premiums written by Syndicate 2987. This variability is offset by profitability from the FAL stop-loss contract. The company benefits from low expenses due to economies of scale with its parent, Brit Limited.
In 2023, underwriting results were supported by premium rate increases, the absence of shock losses, and lower attritional losses from the quota share agreement with Syndicate 2987. Gains from Brit Re’s fixed investment portfolio further contributed to profitability. During the first nine months of 2024, Brit Re’s underwriting and investment results continued to deliver profits.
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