Best Lowers Rating Of Top Layer Re

Best Lowers Rating Of Top Layer Re

NU Online News Service, March 4, 11:40 a.m. EST?Insurance rating company A.M. Best Co. said it has lowered the financial strength rating of Bermuda-based Top Layer Reinsurance Ltd. to "A-plus" (Superior) from "A-double-plus" (Superior), but maintained a stable outlook on the company.

Oldwick, N.J.-based Best said the lowering of the rating was a result of the rating action recently taken by it on State Farm Mutual Automobile Insurance Co., based in Bloomington, Ill., rated "A-double-plus" [Superior], a 50 percent joint owner of the company, along with Renaissance Reinsurance Ltd., rated "A-plus" [Superior], of Bermuda.

Best said it affirmed the financial strength rating of "A-double-plus" [Superior] of State Farm, but assigned it a negative outlook reflecting uncertainties relating to several issues, including its prospective operating performance and its significant exposure to equity market volatility.

Best said it believes the credit quality of Top Layer's most significant backer has been modestly reduced and, as such, has lowered Top Layer's rating to below the "A-double-plus" [Superior] level.

On a stand-alone basis, Best continued, Top Layer is modestly capitalized respective to the high excess layers of property catastrophe risks it assumes, and its rating is materially dependent upon reinsurance protections it receives from State Farm and, to a much lesser degree, RenaissanceRe.

State Farm provides Top Layer with $3.9 billion excess of $100 million stop-loss reinsurance protection, which includes a cut-through agreement to meet policyholder obligations should Top Layer become insolvent. Top Layer is also supported by letters of credit from State Farm and RenaissanceRe totaling $75 million and the ability to make a capital call to these companies each fiscal year for up to $100 million, according to Best.

Despite this action, Best said, the company's rating is still at the superior level, reflecting the continued financial strength of State Farm along with Top Layer's track record of outstanding operating results attributable to RenaissanceRe, which underwrites all risks undertaken by the company.