AM Best assigns ratings to Bermuda Class 3A insurer Fergus Reinsurance

AM Best has assigned a financial strength rating of B+ (Good) and a stable outlook to Bermuda-based Class 3A insurer Fergus Reinsurance.

The ratings reflect Fergus’ balance sheet strength, which AM Best categorises as adequate, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.

Fergus was incorporated in Bermuda on June 11, 2008 and is registered as a Class 3A insurer. Fergus writes low severity, high frequency reinsurance programmes. The company currently has a small number of programmes in its only active cell. AM Best said while Fergus benefits from certain portfolio and geographic diversity, its business profile is considered limited.

Fergus is said to have experienced volatile operating performance from 2008-2017, when it operated as a family-owned company concentrated on a limited book of reinsurance programmes. During the second quarter of 2018, the company was recapitalized with $10.8 million in equity investments, an amount that has increased to $29 million as of October 2019.

According to the rating agency, the operating performance assessment reflects the company’s historically volatile underwriting performance and future uncertainties regarding the execution of its long-term strategy.

The company’s performance in 2019 was characterized by relatively low premium writings as it focused on raising additional equity and establishing disciplined processes for sourcing and underwriting programmes in the cell, but it expects premium growth in 2020. Net investment income, albeit modest, is generated solely from interest on a conservatively invested asset portfolio.