KBRA Affirms All Ratings for Somerset

KBRA affirms the A insurance financial strength ratings (IFSRs) for Somerset Reinsurance Ltd. (Somerset Re) and Somerset Reinsurance Company. KBRA also affirms the BBB+ issuer rating for Somerset Holdings International Ltd. (Somerset Holdings). The companies are collectively referred to as Somerset. The Outlook for all ratings is Stable.

Key Credit Considerations

The ratings reflect Somerset’s disciplined asset-intensive life reinsurance business model, strong capital quality and regulatory capitalization, sustainable profitability supported by growing future earnings, and a concentrated but well-managed business profile. Somerset has established itself as a credible competitor in the asset-intensive life reinsurance market through disciplined transaction execution, customized structuring capabilities and long-term client relationships. The group has successfully transitioned from an emerging platform to an established franchise capable of executing large, complex bilateral transactions while maintaining underwriting discipline and pricing rigor. Somerset’s capital quality remains high as the capital structure relies predominantly on common equity and retained earnings rather than debt or hybrid instruments. The group has no permanent debt, with committed bank facilities and letters of credit used primarily to support liquidity and collateral requirements rather than long-term financing. At year-end 2025, the group’s lead operating company, Somerset Re, maintained a 256% ECR (BSCR) coverage ratio, providing a meaningful buffer above both regulatory requirements and internal capital targets while preserving capacity to support future growth. Since adopting IFRS 17, Somerset has demonstrated improving profitability supported by recurring spread income, disciplined pricing and increasing operating leverage. Continued growth in the Contractual Service Margin (CSM) provides additional visibility into future earnings generation and indicates that profitable new business continues to exceed CSM released into earnings. While Somerset remains solely focused on asset-intensive life reinsurance with earnings concentrated in the US market, the group mitigates concentration through diversified counterparties, products, disciplined risk management, strong liquidity and liability-driven investment management.

Balancing these strengths are a very competitive operating environment and execution risk associated with the company’s growth strategy. The asset-intensive life reinsurance market has become increasingly competitive over the last few years as recent entrants and established participants compete for fewer attractive opportunities. Continued growth depends on Somerset's ability to maintain pricing discipline, successfully deploy assets into its target strategic asset allocation and preserve underwriting standards while operating at a larger scale.

Rating Sensitivities

Successful execution of its long-term growth strategy while maintaining strong capitalization, consistent earnings and disciplined risk management; achievement of its long-term strategic asset allocation; and/or improved market position and franchise strength could result in positive rating action.

Material deterioration in capital; sustained weakening of earnings; significant deterioration of asset quality or liquidity; and/or meaningful weakening of underwriting, investment or risk management discipline could result in negative rating action.

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