KBRA Affirms Ratings for Premia Re and Premia Holdings

KBRA affirms the A insurance financial strength rating (IFSR) of Premia Reinsurance Ltd. (Premia Re). KBRA also affirms the BBB+ issuer rating of Premia Holdings Ltd. (Premia Holdings) as well as the BBB debt ratings on Premia Holdings’ subordinated notes. Collectively, the companies are referred to as Premia. The Outlook for all ratings is Stable.

Key Credit Considerations

The ratings reflect Premia’s strong risk-based capitalization, conservative, high credit quality, liquid investment portfolio, financial flexibility, unique position in the non-life legacy market, seasoned management team, strong enterprise risk management framework, manageable financial leverage, and adequate cash sources to cover interest payments. As of December 31, 2024, Premia Holdings’ total reported capital was $740.3 million, up 2.3% from the prior year-end. In 2024, Premia’s equity position benefited from $1.9 million in net income as well as $14.0 million in unrealized gains on AFS investments, offset by $31.2 million in adverse loss reserve development. At the end of 2024, the group’s BSCR coverage ratio was 238%, while Premia Re’s was 373%. KBRA believes that Premia's portfolio is conservative (more than 80% investment grade), centered on fixed income and funds withheld, with moderate exposure to alternatives. The investment strategy balances liquidity and credit quality, consistent with supporting long-duration, retroactive reinsurance liabilities. The overall risk level is low, with a strong earnings contribution relative to the company’s size. Premia Holdings has a proven track record of accessing capital from banks as well as the private debt and equity markets. Premia also has access to soft capital in the form of reinsurance support from its sponsors. Premia occupies a strategically significant position within the global non-life legacy market, which is specialized, capital-intensive, and relationship driven. While large-scale acquirers focus on market share by consolidating many blocks of non-life legacy reserves, Premia’s model differentiates through targeted structuring and investment leverage. Premia is focused primarily on bespoke deals in select legacy markets. KBRA believes that Premia plays an important role in mid-sized transactions, typically between $500 million and $1.5 billion, where deal customization, funds-withheld structuring, and counterparty trust can provide competitive advantages. Premia is managed by an experienced team of professionals with significant underwriting, structuring, and claims expertise, backed by staff across Bermuda, the US, Europe, and at Lloyd’s of London (AA-/Stable). KBRA believes that Premia’s ERM framework is comprehensive, well-integrated across the organization, and calibrated for its legacy focused business model. The group’s risk appetite is structured to support Premia’s core objective – executing legacy transactions that are capital efficient, risk-sensitive and value-accretive. Premia Holdings’ debt/capital was 33.6% at year-end 2024. While reported EBIT covered interest expense 1.1x as of December 31, 2024, KBRA believes that Premia Re’s nearly $200 million in current dividend capacity provides robust cash coverage of interest.

Balancing these strengths are Premia’s high concentration of US casualty reserves as well as earnings volatility from adverse loss reserve development. At the end of 2024, US casualty represented the largest single class of reserves at 55% with overall US reserves representing 79% of total carried reserves. Recently closed transactions are reducing class concentrations by introducing new liabilities with different risk profiles. Steady growth in fee income is also providing further earnings diversification. Long-tailed loss reserves, such as those assumed by Premia, are exposed to a high risk of change due to evolving societal, legal, regulatory, and macroeconomic environments over the life of the claim settlement process. Premia addresses these risks through regular scanning and a formal, consistent framework for monitoring and reporting on the impact of emerging risks. KBRA currently views the volatility in Premia Holdings results in 2023 and 2024 caused by adverse prior year loss development as inherent to the company’s business model rather than indicating a weakness in the company’s reserving approach.

Rating Sensitivities

Sustained profitability with reduced adverse loss reserve development, improved earnings diversification and/or improved debt coverage metrics could result in a positive rating action. Material deterioration in reserve adequacy or emergence of a pattern of adverse loss development, significant realized investment losses or liquidity stress, and/or deterioration in cash sources to cover debt service could result in a negative rating action.

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Methodologies