KBRA Affirms Ratings for Premia Reinsurance Ltd. and Premia Holdings Ltd.

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KBRA Affirms Ratings for Premia Reinsurance Ltd. and Premia Holdings Ltd.

NEW YORK (February 12, 2020) – Kroll Bond Rating Agency (KBRA) affirms the insurance financial strength rating (IFSR) of A- for Premia Reinsurance Ltd. (Premia Re), a class 4 Bermuda specialty reinsurer focused on acquiring nonlife run-off liabilities. KBRA also affirms the issuer rating of BBB for the organization’s ultimate holding company, Premia Holdings Ltd. (Premia Holdings). Additionally, KBRA affirms the rating of BBB for Premia Holdings’ outstanding senior unsecured notes. The Outlook for all ratings is Stable.

The ratings reflect Premia Re’s sound capitalization, operating profitability and seasoned management team. Premia Re’s risk-based capital ratio (BSCR) is on par with, or above, its run-off peers. Additionally, Premia Re has generated net income each year since inception, inclusive of start-up expenses. Three transactions were finalized during 2019, with mutual agreement reached on two additional ones by year-end that are currently awaiting regulatory approval. Premia Holdings’ management team has extensive experience in the reinsurance industry and currently employs more than 100 professionals in the sourcing, structuring and servicing of the legacy business it has acquired to date and its third-party fee business. Moreover, Premia Re benefits from a whole account quota share agreement provided by Arch Re, one of its founding sponsors. Premia Holdings maintains conservative financial leverage of roughly 20% at 9/30/2019.

Balancing these strengths is the start-up nature of the company and the execution risk for Premia Re’s management team as they enter a mature sector with established competitors. Although KBRA acknowledges that the property/casualty run-off business has demonstrated favorable return characteristics that are largely uncorrelated to the overall financial markets, the potential still exists for run-off business to experience adverse reserve development. Premia Holdings has somewhat mitigated this risk through the acquisition of Alan Gray LLC, a well-established and highly respected claim and audit service firm that provides a fee-based operating model that complements Premia Re’s business strategy. Finally, while its initial capital raise was oversubscribed, the ability of the management team to source additional capital at favorable pricing and terms to support continued growth has yet to be tested.

The Stable Outlook reflects KBRA’s expectation that Premia Re will continue to maintain sound capitalization while successfully executing its run-off acquisition strategy. Additionally, KBRA expects Premia Re to retain key members of its management team and preserve financial flexibility through conservative balance sheet metrics.

The ratings are based on KBRA’s Global Insurer & Insurance Holding Company Rating Methodology published on October 10, 2017. To access ratings, reports and disclosures for Premia Reinsurance Ltd., click here. To access ratings, reports and disclosures for Premia Holdings Ltd., click here.

Related Publications: (available at www.kbra.com)
U.S. Property and Casualty Insurance 2020 Outlook: Bedrock Capital
Underpins Stability

U.S. Title Insurance 2020 Outlook: The New Normal…For Now
Quarterly (Re)Insurance Insights

Analytical Contacts

Carol Pierce, Senior Director
(646) 731-3307
Andrew Edelsberg, Managing Director
(646) 731-2371
Donna Halverstadt, Managing Director
(646) 731-3352

Business Development Contact

Tina Bukow, Managing Director
(646) 731-2368

About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.