A sidecar established in 1999 by co-sponsors RenaissanceRe and State Farm Mutual Automobile Insurance Company has had its ratings affirmed by AM Best.

The ratings agency affirmed the financial strength rating of A+ (Superior) and the long-term issuer credit rating of “aa-” (Superior) of Bermudian-based Top Layer Reinsurance Ltd.

The outlook of these credit ratings is stable.

The ratings 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.

AM Best said these ratings continue to reflect the substantial amount of support Top Layer receives from its co-owners, State Farm Mutual, with an FSR of A++ (Superior) and a long-term ICR of “aa+” (Superior), and Bermudian-based RenRe, with an FSR of A+ (Superior) and a long-term ICR of “aa-” (Superior).

The agency added that the ratings also reflect the significant and explicit parental support to Top Layer from State Farm Mutual, as required by contract. In turn, Top Layer provides State Farm Mutual with exposure to non-US high layer reinsurance risk, which is uncorrelated to its own core business.

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

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

The agency added: “Since Top Layer’s inception in 1999, it has generated solid operating results and sustained just two loss-making years.

“AM Best attributes Top Layer’s favourable results 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, which are high excess layers of non-US property catastrophe risks.

“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 Mutual and RenaissanceRe.”