AM Best Places Watford Re’s Ratings Under Review on COVID-19-Related Investment Hit

AM Best has placed under review with negative implications the Financial Strength Rating of “A-” (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” of Bermuda-based Watford Re Ltd.

Included in the review are Watford subsidiaries Gibraltar-based Watford Insurance Co. Europe Ltd. as well as Watford Insurance Co. and Watford Specialty Insurance Co., both based in New Jersey.

AM Best said these rating actions follow an announcement from Watford on April 23, 2020, which revealed its 2020 first quarter earnings include a net investment loss of approximately $300 million due to investment market volatility following the global economic shutdown related to the COVID-19 pandemic.

The net investment loss is expected to be predominantly comprised of unrealized mark-to-market losses to Watford’s non-investment grade, fixed-income portfolio, said AM Best.

AM Best expects to resolve the under review with negative implications status when Watford’s risk-adjusted capitalization is restored back to its prior level.

AM Best will evaluate on an ongoing basis Watford’s risk-adjusted capitalization and invested asset valuations as updated information becomes available. Further actions could be taken if the ratings agency believes Watford’s financial strength has continued to decay or it has not stabilized in a reasonable amount of time.

Further rating action may also be taken if AM Best believes Watford’s measured levels of balance sheet strength, operating performance, business profile, or enterprise risk management are no longer able to support its current rating level.

Source: AM Best