Press Release|Insurance

KBRA Affirms Ratings for Converge RE II and Converge Holdings LLC

18 Sep 2026   |   New York

Contacts

KBRA affirms the A- Insurance Financial Strength Rating (IFSR) for Converge RE II (Converge RE) and the BBB- Issuer Rating for Converge Holdings LLC (Converge Holdings). KBRA also affirms the BBB- rating on Converge Holdings’ Senior Unsecured Notes due 2031. The Outlook for all ratings is Stable.

Key Credit Considerations

The ratings reflect Converge RE’s demonstrated ongoing owner support, strong liquidity and favorable asset liability management (ALM), broader cedant base, disciplined approach to growth, improving capital quality and internal capital generation. During 2025, an additional $7.6 million was funded under the shareholder promissory note, leaving $34.7 million available at year-end, while reliance on the note declined as retained earnings increased. Converge RE reported $11.7 million of net income and approximately $174 million of GAAP shareholder’s equity at year-end 2025. Liquidity remains strong, supported by cash, U.S. Treasuries, and other liquid fixed income assets, while Converge RE's ALM framework and stress testing support its ability to meet liability cash flows across a range of scenarios. Converge RE also added new cedants during the first half of 2026 while maintaining discipline around transaction economics.

Balancing these strengths are continued concentration in asset intensive annuity reinsurance, and elevated high-risk asset concentration. High-risk asset exposure increased relative to capital during 2025 and remains driven principally by real estate trust investments, increasing exposure to valuation and liquidity risk. These risks are partially mitigated by a funds withheld portfolio of predominantly investment grade and publicly traded fixed income, investment oversight, and Lightstone’s longstanding real estate expertise. Puerto Rico’s solvency regime does not use a risk-based capital formula, although KBRA’s investment stress testing and liquidity analysis continue to support Converge RE’s capital adequacy at the current rating level.

Rating Sensitivities

Sustained capital growth and internal capital generation commensurate with business expansion, sustained improvement in profitability and spreads, reduced reliance on the shareholder promissory note, lower high-risk asset leverage, and/or greater diversification of capital sources and cedant relationships, could result in positive rating action.

Reduced or delayed shareholder support or increased reliance on contingent capital, sustained spread compression or material deterioration in profitability, greater high-risk asset leverage or significant real estate valuation losses that materially weaken capital, and/or elevated holding company financial leverage could result in negative rating action.

To access ratings and relevant documents, click here.

Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1017037