Validus Rating Affirmed

Validus Reinsurance, the principal operating subsidiary of Validus Holdings (VR - Snapshot Report), has been removed from under review by A.M. Best, with negative implications. The rating agency has affirmed the financial strength ratings of “A-” (Excellent) and issuer credit ratings (ICR) of “a-” of Validus Reinsurance Ltd. (Validus). 

A.M. Best has also removed from under review with negative implications and affirmed the ICR of “bbb-” and the indicative ratings for securities available under the shelf registration of “bbb-” on senior debt, “bb+” on subordinated debt and “bb” on the preferred stock of Validus Holdings. The outlook assigned to the above ratings is “stable”. The stable outlook reflects the expectation that operating performance and risk-adjusted capitalization will continue to remain supportive of the current rating levels. 

IPC Holdings was acquired by Validus on Sep 4. After the acquisition all renewal business will be written by the later. The ratings have been reaffirmed in view of prospective benefits from the deal. 

Since IPC Holdings has ceased to exist post acquisition, the rating agency has withdrawn the ICR of “bbb-” and the indicative ratings of “bb+” on preferred stock, “bbb” on senior unsecured debt and “bbb-” on subordinated debt for securities available under the former shelf registration of IPC Holdings Ltd. 

The negative aspect of the deal is the potential loss that may arise because of IPC’s exposure to catastrophe insurance. 

The buyout is expected to result in a strong balance sheet, profitable diversification, as well as a deep and stable management team for the combined entity. However, it will take time before the benefits start accruing.