S&P Assigns ‘AA-‘ Ratings to RenRe Europe; Outlook Stable

January 22, 2009

Standard & Poor’s Ratings Services has assigned its ‘AA-‘ counterparty credit and financial strength ratings on Renaissance Reinsurance of Europe (RenRe Europe) with a stable outlook.

“RenRe Europe, an Ireland-based company, is a subsidiary of Renaissance Reinsurance Ltd. (RenRe; AA-/Stable/–), of which the ultimate parent is RenaissanceRe Holdings Ltd. (NYSE:RNR; A/Stable/–),” said S&P. “RenRe Europe primarily underwrites property catastrophe and specialty reinsurance coverage for re/insurers in Europe, reflecting an aligned strategy with its parent company.”

Credit analyst Taoufik Gharib added: “We view RenRe Europe as core to RenRe, solely based on the strong explicit support in place. Therefore, the ratings on RenRe Europe depend entirely on this contractual support rather than on the intrinsic characteristics of the Irish subsidiary.” This explicit support includes:
— A quota share reinsurance agreement through which RenRe Europe cedes 90 percent of its premiums and related liabilities to RenRe.
— A net worth maintenance agreement (NWMA) between RenRe and RenRe Europe. The NWMA is enforceable by third parties, including, but not limited to, any insurance regulator having jurisdiction over RenRe Europe. In addition, RenRe is committed to maintaining RenRe Europe’s solvency margins as required under the European Reinsurance Directive, or as required under any successive legislation adopted in Ireland to replace the Reinsurance Directive.
— RenRe Europe is an unlimited liability private Irish company. Given this structure, if RenRe Europe were to be liquidated and if there were not sufficient assets to cover the outstanding claims against the company, the shareholders (RenRe holds 99 percent and RNR holds 1 percent) legally would be liable for all of the company’s liabilities. The shareholders’ liabilities are not limited to their investments in RenRe Europe. This further strengthens the parent’s support.

S&P said the “ratings and outlook on RenRe Europe parallel those on RenRe because of its core status to RenRe, which is demonstrated through the aforementioned strong explicit support. Therefore, if we change the ratings or outlook on RenRe, we would similarly revise those on RenRe Europe. However, if the explicit support ceases to exist, which we think is unlikely, we would lower the ratings on RenRe Europe accordingly.”

The rating agency added that it “expects RenRe Europe to continue to focus on writing property catastrophe and specialty reinsurance.”

Source: Standard & Poor’s – www.standardandpoors.com

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