AM Best confirmed the financial strength ratings of A- (excellent) and the long-term issuer credit ratings (long-term ICR) of âa-â (excellent) of
ASC, ASI and AIEL ratings reflect the strength of R&Q’s consolidated balance sheet, which AM Best considers to be very strong, as well as R&Q’s adequate operational performance, neutral business profile and management. appropriate business risk. The rating of R&Q as a non-operating insurance holding company is determined by reference to R&Q’s credit rating on a consolidated basis and the normal subordination of the creditors of the holding company to policyholders of the operating company.
From AM Best’s perspective, ASC, ASI and AIEL are strategically important and integrated within the R&Q group. These companies are essential to the growth of the group’s program activities, providing insurance services to General Agents (MGAs), and in addition, they hold essential licenses for the group’s core program and business activities. traditional in
R & Q’s assessment of balance sheet strength is supported by the risk-adjusted capitalization, which was at its highest level at the end of 2020, as measured by the capital adequacy ratio (BCAR) of Best, and should stay at this level prospectively.
R&Q has shown good financial flexibility in recent years, thanks to frequent increases in capital and debt. Gibson Re supplies R&Q with approximately
R&Q relies on reinsurance due to the high level of cessions associated with its program activities and prospectively, with cessions to Gibson Re. R&Q mitigates its credit risk and reinsurance litigation through close management of its reinsurance panel and the use of collateral when the counterparties are not well rated.
R & Q’s historical profitability has been good, with a five-year (2016-2020) weighted average return on equity of 9.5%, although subject to volatility over the same period. AM Best expects the short-term operational performance of R&Q to remain adequate; however, the creation of Gibson Re is expected to reduce profitability initially, as 80% of day one underwriting earnings will go to the sidecar. Once the reserves in the sidecar have reached scale, the revenues from the management of the sidecar by R&Q are expected to represent an increasing share of the overall operating profits, in addition to the revenues generated by the activities of R&Q. growing program of the group. While AM ââBest expects the historical segment of R&Q to show less earnings volatility in the future, due to the shift to Gibson Re’s commission income and lower underwriting exposures, AM Best Note that segment performance remains sensitive to legacy transaction flows.
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Source: AM Best