Four wholly-owned subsidiaries of Convex Group Limited, the Bermudian-based holding company, have been given a ratings boost by AM Best.

The ratings agency has upgraded the financial strength ratings to A (Excellent) from A- (Excellent) and the long-term issuer credit ratings to “a” (Excellent) from “a-” (Excellent) of Bermudian-based Convex Re Limited, Convex Insurance UK Limited, Convex Europe SA of Luxembourg and Convex Guernsey Limited.

The outlooks of these credit ratings have been revised to stable from positive.

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 rating upgrades reflect Convex’s improved business profile assessment, supported by continued enhancement of its product diversification, scale and profitability.

The ratings agency said Convex has demonstrated excellent market acceptance since its inception, exceeding $3 billion of consolidated gross written premium in 2022, its third full year of operation. Further profitable growth is expected by AM Best over the medium term.

Convex’s risk-adjusted capitalisation was comfortably at the strongest level at year-end 2022, as measured by Best’s capital adequacy ratio. Net required capital is expected to increase over the medium term as the group continues to grow its underwriting portfolio.

The group’s balance sheet strength is supported by a conservative investment portfolio and good financial flexibility.

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

Since inception, the group has demonstrated consistently improving underwriting results, with 2022 representing Convex’s first full year of underwriting profitability, evidenced by a 98 per cent combined ratio.

AM Best expects Convex’s underwriting performance to improve as its book of business gains further scale and diversification.

The likelihood of the group’s successful execution of its business plan is enhanced by the strong record of senior management and underwriters that have extensive experience in the re/insurance industry.