A Bermuda reinsurer has been credited with restricting losses and producing solid operating profits for its sidecar, by demonstrating superior underwriting expertise.

Rating agency AM Best was referring to Renaissance Reinsurance, the company that is celebrating its 30th year since joining the wave of reinsurers that formed on the island in 1993.

The sidecar is Top Layer Reinsurance, established in 1999 by RenRe and co-sponsor State Farm Mutual Automobile Insurance Company.

AM Best has just affirmed the Financial Strength Rating of A+ (Superior) of Top Layer Re and its Long-Term Issuer Credit Rating of “aa-” (Superior). The outlook of the ratings is stable.

They reflect Top Layer’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and very strong enterprise risk management.

The agency said the ratings continue to reflect the substantial amount of support Top Layer receives from its co-owners, RenRe and State Farm.

The ratings also reflect the significant parental support from State Farm, which provides Top Layer with explicit support as required by contract.

In turn, Top Layer provides State Farm with exposure to non-US high layer reinsurance risk, which is uncorrelated to its own core business.

Top Layer Re’s capital profile is very unique. The joint venture sidecar was formed in 1999 to provide worldwide, high-layer, non-US property catastrophe reinsurance, which includes Caribbean earthquakes but excludes Caribbean wind storms.

Best said: “The company’s capitalisation is enhanced through various contractual obligations, resulting in substantial capital support and reinsurance protection from State Farm, and, to a much lesser degree, RenaissanceRe.

“The occurrence of large losses will trigger capital calls for State Farm and RenaissanceRe to replenish Top Layer’s capital.

“Moreover, State Farm provides Top Layer with $3.9 billion excess of $100 million stop-loss reinsurance protection. This coverage is significantly larger than the aggregate exposures Top Layer undertakes in each of its geographic zones.”

Top Layer has always generated solid operating results and has sustained only two losses.

AM Best attributes this favourable result to the property catastrophe underwriting expertise of RenaissanceRe, and to the fact that there are very few catastrophes of a magnitude sufficient to impact the programmes written in Top Layer’s areas of focus.

Top Layer maintains a modest amount of on-balance sheet capital relative to the high excess layers of property catastrophe risks it assumes.

AM Best acknowledges that Top Layer’s ratings are largely dependent upon the support it receives from State Farm and RenaissanceRe.

RenRe began as an underwriter of property catastrophe and specialty reinsurance and has evolved into a leading global property, casualty and specialty reinsurer with platforms in seven countries and $9.2 billion in gross written premium in 2022.

Kevin J. O’Donnell, president and CEO, noted this June: “When RenaissanceRe was founded 30 years ago, our goal was to bring a renaissance to the underwriting of property catastrophe reinsurance.

“While we have grown and diversified over the decades, we have stayed true to this vision of being the best underwriter and our mission of matching desirable risk with efficient capital.”