AM Best has revised the outlooks for Somers Re Ltd. and its subsidiaries from stable to positive while affirming their financial strength rating (FSR) of A- (Excellent) and long-term issuer credit ratings (Long-Term ICR) of “a-” (Excellent).
AM Best said that the ratings action also applies to Somers Re Ltd. (Bermuda), Watford Insurance Company Europe Limited (Gibraltar), Watford Specialty Insurance Company (New Jersey), and Axeria IARD (France).
According to AM Best, the ratings reflect Somers’ balance sheet strength, assessed as very strong, along with adequate operating performance, a neutral business profile, and appropriate enterprise risk management.
Somers operates a global reinsurance and insurance platform, with underwriting sourced primarily through contracts with Arch Capital Group Ltd. and its affiliated entities, which also provide key underwriting functions.
While the group has historically focused on medium- to long-tailed lines of business with lower volatility, it has recently expanded into higher-margin, short-tailed lines with greater volatility.
Somers Re is also not the only reinsurance entity that saw its ratings announced this month. Soteria Reinsurance, another Bermuda-based reinsurer, also had its financial strength rating of A- and long-term issuer credit rating of “a-” affirmed by AM Best, with a stable outlook.
The revised outlook reflects the group’s shift toward a de-risked investment portfolio, which has transitioned from leveraged loans and subprime credit assets to primarily investment-grade investments. Underwriting performance has also shown an improving trend over the past five years, with the group achieving underwriting profitability in 2023.
AM Best expected continued profitable or breakeven underwriting, combined with lower-volatility investment income, to strengthen the group’s capital position and balance sheet.
The ratings for WIC remain under review with positive implications as the company undergoes full integration into Arch Capital Group Ltd. AM Best stated that it expects to resolve the under-review status once WIC’s integration into the Arch organization is complete.
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