NOVEMBER 11, 2021 11:44 AM (EST)
AM Best Affirms Credit Ratings of Randall & Quilter Investment Holdings Ltd. and Its Subsidiaries
Senior Financial Analyst
+44 20 7397 4395
Associate Director, Analytics
+44 20 7397 0312
Manager, Public Relations
+1 908 439 2200, ext. 5159
+1 908 439 2200, ext. 5644
FOR IMMEDIATE RELEASE
LONDON - NOVEMBER 11, 2021 11:44 AM (EST)
AM Best has affirmed the Financial Strength Ratings of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” (Excellent) of Accredited Surety and Casualty Company, Inc. (ASC) (Orlando, FL), Accredited Specialty Insurance Company (ASI) (Phoenix, AZ) and Accredited Insurance (Europe) Limited (AIEL) (Malta). Concurrently, AM Best has affirmed the Long-Term ICR of “bbb-” (Good) of Randall & Quilter Investment Holdings Ltd. (R&Q) (Bermuda) [AIM: RQIH]. The outlook of these Credit Ratings (ratings) is stable. ASC, ASI and AIEL are wholly owned subsidiaries of R&Q.
The ratings of ASC, ASI and AIEL reflect the consolidated balance sheet strength of R&Q, which AM Best assesses as very strong, as well as R&Q’s adequate operating performance, neutral business profile and appropriate enterprise risk management. The rating of R&Q as a non-operating insurance holding company is determined by reference to the credit assessment of R&Q on a consolidated basis and the normal subordination of holding company creditors to operating company policyholders.
In AM Best’s view, ASC, ASI and AIEL are strategically important to and integrated within the R&Q group. These companies are pivotal to the group’s growing program business, providing insurance services to managing general agents (MGAs), and in addition, they hold essential licenses for the group’s core operations of program and legacy business in the United States and Europe.
R&Q’s balance sheet strength assessment is supported by risk-adjusted capitalisation, which was at the strongest level at year-end 2020, as measured by Best’s Capital Adequacy Ratio (BCAR), and is expected to remain at this level prospectively. Gibson Re Ltd, a sidecar that will accept 80% of all new legacy business on a quota share basis for a period of three years, was established in the fourth quarter of 2021. Cessions to Gibson Re are expected to significantly reduce R&Q’s underwriting capital requirements arising from new legacy business and moderate prospective volatility in risk-adjusted capitalisation and operating results over the coming years.
R&Q has demonstrated good financial flexibility in recent years, through frequent equity and debt raises. Gibson Re provides R&Q with approximately USD 300 million of committed third-party capital to support an estimated USD 2 billion of legacy transactions for the coming three years (gross of R&Q’s retention). The group has articulated its interest in establishing further sidecar structures in the future. However, AM Best notes that refinancing risk does arise once Gibson Re ceases to accept new business after this initial three-year term.
R&Q is reliant on reinsurance due to the high level of cessions associated with its program business and prospectively, with cessions to Gibson Re. R&Q mitigates its reinsurance credit and dispute risk through close management of its reinsurance panel and the use of collateral where counterparties are not highly rated.
R&Q’s historical profitability has been good, with a five-year (2016-2020) weighted average return on equity of 9.5%, albeit subject to volatility over the same period. AM Best expects R&Q’s near-term operating performance to remain adequate; however, the establishment of Gibson Re is expected to reduce profitability initially, as 80% of day-one underwriting gains will be ceded to the sidecar. Once reserves in the sidecar have reached scale, fee income from R&Q’s management of the sidecar is expected to represent an increasing portion of overall operating earnings, adding to the fee income generated from the group’s growing program business. While AM Best expects R&Q’s legacy segment to exhibit less earnings volatility in future, due to the shift toward fee income from Gibson Re and lower underwriting exposures, AM Best notes that performance in the segment remains sensitive to legacy deal flow.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.