Trust Re's risk-adjusted capitalisation has been decreasing in the last two years, negatively impacted by its strong business growth and increased retention level, and A.M. Best only considers it as adequate for the current rating level. However, A.M. Best considers that Trust Re actively manages its capital position and expects the company to take appropriate actions in 2012 and 2013 to restore its risk-adjusted capitalisation to a comfortable level whilst ensuring a more efficient utilisation of capital to support its changing profile.
Trust Re's management is proactively looking at measures to improve capital efficiency, and the steps taken in 2011 to de-risk the company's investment portfolio are expected to continue in the next two years.
Trust Re published resilient consolidated technical results of $9.5m in 2011, having been hit by industry major losses. Trust Re's underwriting results are underpinned by a good loss ratio, with a five-year average below 65% despite the peak of 70% recorded in 2011, with a strong performance on its core facultative book, including energy (offshore and onshore) and property risks. Prospectively, the combined ratio is likely to remain at approximately 93%. A significant driver is the sound reserving policy and disciplined underwriting, which entails lower volatility of future earnings. Moreover, the company is supported by a stable expense ratio of around 26% and steady returns on investments between 4% and 6%, benefiting from Trust Underwriting Limited, which is viewed as a strategic investment by the company, allowing exposure to the Lloyd's market.
Furthermore, Trust Re has a good developing business profile as a specialist underwriter of energy and property reinsurance in the Arab, Afro-Asian, Eastern European and Russian markets.
In A.M. Best's opinion, Trust Re has improved its enterprise risk management process, and A.M. Best expects further development of the framework to be made. A.M. Best recognizes the measures taken by Trust Re and views the company's risk management above par for the region.
Upward rating movement is unlikely at this point.
Downward rating pressure could occur if Trust Re's risk-adjusted capitalisation were not to improve in the next two years.
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. Key criteria utilised include "Understanding Universal BCAR"; "Evaluating Country Risk;", "Risk Management and the Rating Process for Insurance Companies"; "Evaluating Non-Insurance Ultimate Parents"; and "Catastrophe Analysis in A.M. Best Ratings".
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
A.M. Best Europe - Rating Services Limited is a subsidiary of A.M. Best Company. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.
Source: http://www.ameinfo.com/am-affirms-ratings-trust-international-insurance-310223
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