KBRA Affirms Ratings of Premia Reinsurance Ltd. and Premia Holdings Ltd.

KBRA affirms the A insurance financial strength rating (IFSR) on Premia Reinsurance Ltd. KBRA also affirms the BBB+ issuer rating on Premia Holdings Ltd. 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 solid execution of its business strategy, strong drivers of profitability, strong risk-based capitalization, manageable financial leverage, enhanced financial flexibility and access to capital, seasoned management team, and strong enterprise risk management framework. Over the past six and a half years since its inception, Premia has acquired over $5 billion in gross loss reserves, including the acquisition of insurance regulated entities in the US, UK, Europe, and Lloyd’s of London (AA-/Stable). Premia now has a scalable platform that can adjust to incoming books of business from future transactions according to their size, risk profile and location. Premia’s profitability is driven by a consistent and conservative approach to underwriting and claims management as well as increasing investment income on its asset portfolio. The group has reported net income every year since inception. Future profitability will be driven by Premia’s robust active pipeline across multiple lines of business, distribution channels and jurisdictions. At end-2022, the group’s BSCR coverage ratio was 219% (2021: 257%), while Premia Re’s was 384% (2021: 420%). At end-2022, Premia Holdings’ debt/capital on a US GAAP reported basis was 34.8%, up from 30.3% at end-2021, driven by a decrease in equity due to unrealized AOCI losses. Removing the impact of AOCI, consistent with Premia’s debt covenants, debt/capital at end-2022 was 29.0%, down from 30.7% at end-2021. Premia has a proven track record of prudently accessing needed capital from banks as well as the private debt and equity markets. Premia also has access to soft capital from its sidecar and strategic sponsor via reinsurance support. Premia is led by an experienced team of professionals with significant underwriting, structuring, claims and investment expertise backed by a growing staff across its platform. KBRA believes that Premia has a comprehensive, and continually evolving, enterprise risk management framework. The group performs extensive modeling and stress testing of individual transactions as well as the entire portfolio to ensure that capital remains sound, liquidity is strong to pay liabilities when due, and regulatory requirements are met. KBRA believes that Premia operates under conservative risk tolerance and guidelines. Balancing these strengths is Premia’s exposure to potential adverse loss development due to evolving societal, legal, regulatory, and macroeconomic risks over the life of the claim settlement process on long-tailed lines of business such as those Premia acquires.

Rating Sensitivities

Favorable capital trends, reduced financial leverage, and favorable earnings trends could result in a positive rating action. An adverse change in risk profile, loss of a key member of the management team without a suitable replacement, material adverse loss reserve development, elevated financial leverage or material realized losses on its investment portfolio could result in a negative rating action.

A report will be available shortly on kbra.com

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Methodologies