KBRA Assigns Preliminary Rating to Knighthead Annuity & Life Assurance Company's Prescribed Capital Notes

KBRA assigns a BBB+ preliminary long term credit rating for up to $100 million of twenty-year prescribed capital notes (Notes) to be issued by Knighthead Annuity & Life Assurance Company (KHAL). The Outlook for the preliminary rating is Stable.

Key Credit Considerations

KHAL plans to use the proceeds from the issuance for general corporate purposes, including assumption of additional reinsurance and M&A. KHAL’s capitalization strengthened meaningfully in 2025, supported by retained earnings and capital contributions. The Notes are expected to further enhance regulatory and financial flexibility. KBRA's pro forma prescribed capital note leverage remains manageable under KBRA’s $100 million issuance assumption and pro forma debt service coverage remains strong under both earnings-based and conservative cash-based measures. Subject to prior approval of the Cayman Islands Monetary Authority (CIMA), KHAL has paid all required interest on its current outstanding prescribed capital notes since issuance in October 2022. The Notes are deeply subordinated to policyholders, claimants, beneficiaries, and other creditors, rank pari passu with existing and future prescribed capital notes issued by KHAL, and require CIMA approval for interest, principal, and redemption payments.

Balancing these strengths are the CIMA approval and deferral mechanics which create payment-timing uncertainty for noteholders. KHAL’s investment strategy has produced strong long-term returns and materially supported earnings, but the general account includes a meaningful allocation to less liquid and higher-risk assets. While this is consistent with KHAL’s long-short total-return investment strategy and is supported by risk management and valuation controls, it remains a key source of earnings and capital volatility, particularly under adverse market conditions. KHAL remains concentrated in fixed annuity business, with earnings and spread performance driven primarily by MYGA/FIA-related direct and assumed business and investment spread management. Product concentration and reliance on investment performance remain constraining credit factors, notwithstanding growing distribution capabilities and strategic expansion into additional jurisdictions and platforms.

Rating Sensitivities

An upgrade of KHAL's insurance financial strength rating (IFSR) could result in positive rating action, while a downgrade in KHAL's IFSR could result in negative rating action.

To access ratings and relevant documents, click here.

Recent Publications

Methodology