Ownership of in run-off Kelvin Re expected to change: AM Best

Rating agency AM Best has said that it expects the ownership of the Guernsey based, Credit Suisse Insurance Linked Strategies supported reinsurance company Kelvin Re Limited will change, which suggests a sale of the reinsurer to a run-off specialist, or perhaps another buyer, is close.

As a reminder, the Credit Suisse ILS linked reinsurance entities Kelvin Re and Humboldt, were both being closed down due to strategic decisions taken by the ultimate institutional investors behind them, with their portfolios being put into run-off.

Kelvin Re and Humboldt Re both took their financial support through insurance-linked securities (ILS) investors and funds under the management of Credit Suisse Asset Management’s specialist ILS investment unit.

Kelvin Re was solely backed by investments made by the Abu Dhabi Investment Council, a sovereign wealth investor.

Humboldt Re, meanwhile, was backed by capital from some of the insurance-linked securities (ILS) funds managed by Credit Suisse Asset Management (CSAM).

Both suffered relatively significant losses through consecutive years of natural catastrophe events, leading to their ultimate shuttering and as the investors took the strategic decisions to place them into run-off.

In October 2021, Humboldt Re Ltd. was sold to European property and casualty (P&C) run-off specialist company Marco Capital Holdings Limited.

There hadn’t been any update on the future of Kelvin Re at that time.

But now rating agency AM Best has provided some information, saying that Kelvin Re’s ratings remain under review with negative implications, with the main reason being the fact a sale or disposal of the reinsurance firm is anticipated.

AM Best said that maintaining the under review with negative implications status of Kelvin Re’s credit ratings reflects its “expectation that Kelvin Re’s ownership will change” and the uncertainty regarding what impact this may have on the reinsurers prospective financial strength.

“AM Best expects to resolve the under review status once a full analysis of the company’s credit fundamentals can be performed, including the impact of its new ownership,” the rating agency said.

All of which implies a change of ownership is imminent for Kelvin Re, which will likely see it disposed of to a run-off specialist, although it could possibly be sold as a going concern, if another party wanted the rated reinsurance structure in Guernsey.

AM Best also said that since Kelvin Re entered run-off in December 2020, its underwriting exposures are now significantly lower, adding that the reinsurer produced a loss of US $5 million in the first 11 months of 2021.

We’ll update you should any news emerge about a sale of Kelvin Re.