Best Comments on Ratings Effect of Catlin/Wellington Deal

A.M. Best Co. has commented that the ratings of Bermuda-based Catlin Group Limited (Catlin), Catlin Insurance Company Limited (CICL), also based in Bermuda, and the U.K.-based Catlin Insurance Company (UK) Ltd. remain under review with negative implications following the announcement that Catlin has made an offer for Wellington Underwriting plc (WU) (See IJ Website Oct. 20, 27, 30).

Many commentators and analysts were surprised by Best’s original decision to review Catlin’s ratings. The Company even issued a statement questioning the action. At the time there had only been unconfirmed reports – the first one in the London trade paper Insurance Day – that Catlin was in talks with Wellington. However, it now appears that the rating agency was exceptionally well in formed.

Best indicated that it “needs to complete its review of the likely impact on Catlin’s consolidated risk-adjusted capitalization of future major events, particularly the impact of stress scenarios. However, enhanced diversification that may result from the proposed acquisition could have a positive impact on this analysis.

“The review will still include an assessment of the benefit to CICL of its proposed catastrophe swap agreement. A.M. Best anticipates resolving the under review status of the Catlin ratings prior to completion of the proposed acquisition, although this remains subject to the outcome of the analysis.”

The bulletin added that Best’s ratings of Lloyd’s Syndicate 2003, which is managed by Catlin Underwriting Agencies Limited (CUAL), are unchanged.

In addition Best said its “ratings of WU, Wellington Specialty Insurance Company (Scottsdale, AZ) and Lloyd’s Syndicate 2020 (managed by Wellington Underwriting Agencies Limited) are also unchanged.”