Fitch Affirms Max Re’s ‘A’ IFS Ratings; ‘BBB’ Long-term Rating Assigned

Fitch Ratings has affirmed the ‘A’ insurer financial strength ratings of Max Re Ltd. and its Dublin-based subsidiary, Max Re Europe Ltd. Fitch has also assigned a ‘BBB’ long-term issuer rating to Max Re Capital Ltd., the Bermuda-based holding company of Max Re Ltd. The Rating Outlook is Stable.

The ratings reflect Max Re’s discipline and flexibility in underwriting risk, limited investment portfolio downside risk, and parent company financial flexibility. Partially offsetting these positives are execution risk as Max Re has shifted its product strategy from its original focus, and an overall higher investment risk strategy compared to the industry and peers.

Max Re is a Bermuda-based multi-line reinsurance and insurance company that was formed in July 1999 and commenced operations in January 2000. The company offers alternative risk transfer and traditional products in the property/casualty market as well as longer-tail business that consists of highly structured risk transfer products in the property/casualty and life and annuity markets. Max Re focuses on managing its overall enterprise risk in consideration of both its underwriting risk and investment risk.

Max Re values its underwriting flexibility to shift strategy based on changing market conditions and expected returns on capital. Max Re’s original product strategy called for an emphasis on life and annuity transactions and property/casualty structured transactions.

Accordingly, the mix of business in the first year of operations (2000) was 70 percent life and annuity and 30 percent property/casualty. However, as a result of the low interest rate environment that has decreased the demand for life and annuity products and the increased market demand and improved pricing conditions of the property/casualty market, Max Re shifted its strategy more into property/casualty business.

In 2003, 90 percent of net written premiums were in property/casualty, with a focus on traditional reinsurance and insurance business, while in 2002, 98 percent of net written premiums were in property/casualty, primarily in structured and alternative risk transfer products.