AM Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit ratings of “a” (Excellent) of the wholly owned subsidiaries of Bermudian-based Convex Group Ltd, the non-operating holding company of the group.

The rated subsidiaries are island-based Convex Re Ltd, Convex Insurance UK Ltd, Convex Europe SA of Luxembourg and Convex Guernsey Ltd.

The outlook of these credit ratings is stable.

The ratings reflect Convex’s consolidated balance sheet strength, which AM Best assesses as very strong, as well as the group’s adequate operating performance, neutral business profile and appropriate enterprise risk management.

The ratings factor in the strategic importance of CRL, CIL and CES to Convex, while CGU’s ratings consider the significant reinsurance support it receives from CRL.

The ratings agency said Convex’s consolidated risk-adjusted capitalisation was comfortably at the strongest level at year-end 2023, as measured by Best’s capital adequacy ratio.

AM Best said: “The group’s balance sheet strength is supported by good financial flexibility, notably demonstrated in the fourth quarter of 2020 by an equity capital raise of $1 billion and the issuance of perpetual preference shares of $500 million, which were fully drawn down in 2023.

“An offsetting rating factor is Convex’s material exposure to catastrophe risk and its dependence on reinsurance to manage this risk; however, this is mitigated partially by a reinsurance panel of excellent credit quality.”

The agency added: “Convex has demonstrated consistently improving underwriting results since its inception in 2019, with 2023 representing the group’s most profitable year to date, evidenced by an 89 per cent combined ratio (as calculated by AM Best).

“Results in 2023 benefited from a relatively benign catastrophe year, as well as the gradual unwind of mark-to-market losses on the group’s fixed-income portfolio. Prospectively, profitability is expected to continue to improve as Convex’s book of business gains more scale and further diversification, supported by a favourable rate environment.

“Convex has quickly established a strong franchise as an internationally recognised [insurance and reinsurance] group, with operations spanning across the UK, Bermuda, Luxembourg and Guernsey, as well as a managing general underwriter in the United States.

“The group’s gross written premium exceeded $4 billion in 2023 and is expected to continue to expand rapidly over the medium term.”