Best gives new Bermuda reinsurer Third Point strong rating, but sees challenges

OLDWICK, N.J.— A.M. Best Co. Inc. has assigned a financial strength rating of A- and issuer credit rating of a- to new reinsurer Third Point Reinsurance Ltd., with a stable outlook assigned to both ratings.

Third Point Re's ratings “are based on its excellent risk-adjusted capitalization, experienced management team and prudent business plan,” Best said in a statement announcing its first rating for the new Hamilton, Bermuda-based reinsurer.

“Partially offsetting these positive rating factors are the startup nature of the company, the greater investment risk associated with an alternative investment strategy, as well as the increased competition in the reinsurance marketplace that may challenge some of the tenets of TP Re's business plan,” Best said in the statement.

Best noted that the assets of Third Point Re will be managed by Third Point L.L.C., a New York-based investment manager with more than $7.6 billion in assets under management that is registered with the Securities and Exchange Commission.

Best said Third Point Re's assets will be in a separate portfolio within Third Point L.L.C. and will not be co-mingled with other investors at Third Point L.L.C.

Competition, abundant capacity

“In addition, A.M. Best anticipates that TP Re's management will be challenged by competition from established reinsurers as well as other startup entities,” Best said. “The addition of more capacity into an already overcapitalized reinsurance marketplace could pressure underwriting margins.”

Third Point Re, which began operations this month, is led by Chairman and CEO John Berger, former CEO of reinsurance at Alterra Capital Holdings Ltd.