A.M. Best Assigns Rating to Risk Reinsurance Limited.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--April 24, 2002 A.M. Best Co. has assigned an initial financial strength rating of A (Excellent) to Risk 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 (RRL), Cayman Islands. The rating reflects RRL's strong capitalization and balance sheet strength, profitable results as well as the strategic role it performs as a captive insurance company for Transpower New Zealand Limited Transpower New Zealand Limited (TPNZ) is the state-owned enterprise responsible for electric power transmission in New Zealand. Transpower performs two major functions in the New Zealand Electricity Market. , a state-owned enterprise (SOE SOE - Standard Operating Environment ) of the government of New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland. . Incorporated in the Cayman Islands on January 14, 2001, RRL's initial capitalization included NZD NZD In currencies, this is the abbreviation for the New Zealand Dollar. 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. 20 million (USD USD In currencies, this is the abbreviation for the U.S. Dollar. 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. 8.8 million) from Transpower. All investment assets are placed in a conservative and highly liquid portfolio of cash equivalents and bonds. Investments are restricted to NZD and USD denominated instruments. Strong capital measurements and conservative underwriting ratios as determined by A.M. Best's capital adequacy model indicate that RRL carries sufficient capital to support its business writings and the retention levels assumed on the risks insured. The underwriting portfolio of RRL is focused on providing specific catastrophe property coverage to Transpower for the Cook Strait power and fiber optic cables. The policy covers marine vessel damage, earthquake, seaquake sea·quake n. An earthquake originating under the sea floor. [sea + (earth)quake.] seaquake An earthquake originating under the ocean floor. , landslide and volcanic eruption. A.M. Best views favorably that RRL is funded at a level twice the maximum net exposure retained under the policy. Additionally, RRL has ceded excess exposure layers to reinsurers with strong financial strength ratings. It does not insure any third party risks and does not intend to do so. Partially offsetting these factors are the short history of the captive and that the source of its business is Transpower's underwater cables, which represents a relatively high concentration of risk. Furthermore, the nature of the hazards covered presents the potential for a substantial loss for RRL. Whether there is a partial or total break in any cable, the cost of repair or full replacement will be significant. Low frequency but high severity exposures characterize the coverage. Nonetheless, the placement of the underwater cables is such that the probability of a full limit Probable Maximum Loss Probable Maximum Loss (PML) The anticipated value of the largest loss that could result from the destruction and the loss of use of property, given the normal functioning of protective features (firewalls, sprinklers, and a responsive fire department, among others, in the (PML PML - Parallel ML. ["Synchronous Operations as First-Class Values", J.H. Reppy <jhr@research.att.com>, Proc SIGPLAN 88 Conf Prog Lang Design and Impl, June 1988, pp. 250-259]. ) is deemed by management to be quite remote. Transpower also employs substantial risk management and loss prevention programs to protect the cables from partial damage or individual cable breakage. Moreover, RRL benefits from the strong implied support of Transpower, which provides RRL with additional levels of financial flexibility. In A.M. Best's opinion, RRL has the advantage of the dedicated attention of its management to ensure its sound operation and financial security. Consequently, A.M. Best views the assigned rating as stable. A.M. Best is an approved rating agency under New Zealand's Inspections and Ratings Act 1994. 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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