AM Best has affirmed the financial strength rating (FSR) of A+ (Superior) and the long-term issuer credit rating (Long-Term ICR) of “aa-” (Superior) for Bermuda-based Top Layer Reinsurance Ltd. The outlook for both ratings remains stable.
The ratings reflect Top Layer’s strong balance sheet, adequate operating performance, neutral business profile, and very strong enterprise risk management, according to AM Best.
According to the credit agency, the company’s ratings are further supported by significant backing from its co-owners, State Farm Mutual Automobile Insurance Company and Renaissance Reinsurance Ltd.
Top Layer also benefits from explicit parental support from State Farm Mutual, as required under contractual agreements. In exchange, Top Layer provides State Farm with exposure to high-layer non-US reinsurance risks, which are largely uncorrelated with State Farm’s core business operations in the US.
Top Layer’s capital structure is bolstered by several contractual obligations that result in considerable capital support and reinsurance protection from both State Farm Mutual and, to a lesser extent, RenaissanceRe.
In the event of significant losses, capital calls would be triggered for State Farm and RenaissanceRe to replenish Top Layer’s capital reserves. Additionally, Top Layer benefits from $3.9 billion in stop-loss reinsurance protection provided by State Farm Mutual, covering excess of $100 million. This coverage exceeds the aggregate exposures undertaken by Top Layer across its geographic regions.
Since its founding in 1999, Top Layer has recorded positive operating results, with only two years of losses. AM Best attributes these favorable outcomes to the underwriting expertise of RenaissanceRe in property catastrophe risks and the relatively few catastrophic events of sufficient magnitude to impact the high-excess layers that Top Layer underwrites in its non-US property catastrophe portfolio.
AM Best also noted that Top Layer holds a modest amount of on-balance sheet capital relative to the risks it assumes in high-excess layers.
The company also noted that Top Layer’s ratings are heavily reliant on the continued support from its parent companies, State Farm Mutual and RenaissanceRe.
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