A.M. Best Affirms Ratings of Flagstone Reinsurance Limited; Assigns Rating to Flagstone Reinsurance Holdings.OLDWICK, N.J. -- A.M. Best Co. has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the financial strength rating of A- (Excellent) and the issuer credit rating (ICR (Intelligent Character Recognition or Image Character Recognition) The machine recognition of hand-printed characters as well as machine printing that is difficult to recognize. ) of "a-" of Flagstone flagstone: see silt. Reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. Limited (Flagstone) (Hamilton, Bermuda).Additionally, A.M. Best has assigned an ICR of "bbb-" to Flagstone's parent, Flagstone Reinsurance Holdings Limited (Hamilton, Bermuda). The outlook for all ratings is stable. The rating affirmations reflect Flagstone's strong risk-based capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. and its successful first year execution of operations within the parameters of the business plan presented to A.M. Best during the initial rating process in 2005. In addition to meeting A.M. Best's requirements for new company formations, the ratings also reflect Flagstone's ability to sustain A.M. Best's stricter risk-based capital requirements Risk-Based Capital Requirement A stated requirement of liquid reserves placed upon banks and institutions that deal in risky ventures. Notes: These requirements exist for the protection of investors who hold an interest in these types of businesses. for newly formed property catastrophe companies. A.M. Best's initial concerns regarding Flagstone's establishment of systems and operational controls to underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. , risk management, claims, investments and financial reporting have been alleviated. The company also has successfully augmented its management and staff with the addition of seasoned personnel through its first year of operations. Although Flagstone has deviated from its original business plan, the adjustments have been prudent and were reviewed with A.M. Best before being implemented. The adjustments made through the year were primarily to focus on pricing opportunities in certain regions while maintaining a rational risk profile. Despite these pricing opportunities, Flagstone fell below its overall premium volume plan for its first year of operation. As a result, risk-based capitalization remains strong, within A.M. Best's initial expectations. The rating analyses also consider the establishment of Flagstone Reinsurance Suisse SA, a subsidiary of Flagstone, which is to be capitalized with CHF CHF In currencies, this is the abbreviation for the Swiss Franc. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 110 million, with Flagstone providing reinsurance support. Through this local presence, Flagstone intends to be in a position to closely follow and respond effectively to the changing needs of the various European insurance markets. In addition to being susceptible to property catastrophe events, Flagstone will continue to be challenged by increased competition from both established companies and other new start-ups in the industry. The additional capacity brought to the market will dampen expected returns Expected Return The average of a probability distribution of possible returns, calculated by using the following formula: over the cycle if pricing of reinsurance coverage fails to meet anticipated levels. Furthermore, the ability of Flagstone to continue to build and retain market acceptance will only be proven over time. As part of the new company formation monitoring process, A.M. Best will continue to closely monitor the quarterly performance of Flagstone against its stated business plan, and any material negative deviations in terms of management, earnings, capitalization or risk profile could result in downward pressure on the assigned ratings. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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