KBRA Affirms BBB+ IFSR for Tower Hill Insurance Exchange and A- IFSR for Tower Hill Prime Insurance Company and Assigns BB+ LTCR to Tower Hill Insurance Exchange $200 Million Senior Surplus Notes

KBRA affirms the BBB+ Insurance Financial Strength Rating (IFSR) for Tower Hill Insurance Exchange and the A- IFSR for Tower Hill Prime Insurance Company. KBRA also assigns a BB+ Long Term Credit Rating (LTCR) to the Tower Hill Insurance Exchange $200 Million Senior Surplus Notes. The Outlook for all ratings is Stable.

Key Credit Considerations

Positively impacting the ratings are the sound risk-adjusted capital metrics, conservative investment portfolios, significant minority owner and relationships with RenRe, and the strong catastrophe reinsurance program. Negatively impacting the ratings are the deterioration in underwriting performance at Tower Hill Prime, product and geographic concentration, catastrophe exposure and reinsurance dependence, and profitability impacted at Tower Hill Prime by recent adverse loss reserve development.

Rating Sensitivities

The following could result in a ratings upgrade: sustained operating profitability, improved underwriting leverage and reserve development, material organic surplus growth, or favorable change in risk profile. The following could result in a ratings downgrade: continued deterioration in underwriting leverage and reserve development; weather events negatively impacting the balance sheet, continued operating losses; inability to obtain reinsurance on acceptable terms and pricing, causing an increase in loss exposure, a reduction in the company’s ability to underwrite policies or a drag on earnings; material decline in credit quality of reinsurance panel and/or inability to collect on reinsurance causing a material adverse effect on operating results and overall financial condition; or an unfavorable change in risk profile.

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