A.M. Best Affirms Credit Ratings of StarStone Insurance Bermuda Limited and Its Subsidiaries

A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of a- of StarStone Insurance Bermuda Limited (StarStone) (Bermuda) and its subsidiaries, StarStone Insurance SE (Liechtenstein), StarStone Specialty Insurance Company (StarStone Specialty) and StarStone National Insurance Company (StarStone National). The outlook of these Credit Ratings (ratings) remains stable. StarStone Specialty and StarStone National are domiciled in Wilmington, Delaware, USA.

The ratings reflect StarStones consolidated balance sheet strength, which A.M. Best categorises as very strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management. The ratings also benefit from the support of Enstar Group Limited (Enstar) and the Trident Funds, managed by Stone Point Capital LLC (Stone Point) which, taken together, own 98.3% of the group. The owners provide strategic and operational support to StarStone, as well as financial assistance if needed, as demonstrated by a planned capital injection by the end of December 2018. Both companies have a proven track record of building strong and profitable insurance businesses, Enstar primarily in run-off insurance and Stone Point in active underwriting.

StarStones consolidated risk-adjusted capitalisation, as measured by Bests Capital Adequacy Ratio (BCAR), is expected to be at the strongest level at year-end 2018, with the planned capital injection offsetting the impact of strong growth in net written premiums and expected losses during the year. BCAR scores are projected to strengthen in 2019 and 2020, as the result of a planned decline in premium income as the group carries out a repositioning exercise to focus on profitable lines. A degree of uncertainty around reserve adequacy and an increase in investment risk are offsetting factors for the balance sheet strength assessment.

After a period of improving performance, which saw StarStone report modest underwriting profits in 2015 and 2016 after several years of losses, the group reported an underwriting loss in 2017, largely as a result of claims from the Hurricanes Harvey, Irma and Maria catastrophe events. The five-year average combined ratio to December 2017 is 103%. In addition, StarStones 2018 performance has been affected by higher attritional losses across the marine, casualty and property lines, and a generally elevated level of large loss activity. As a result, A.M. Best expects a significant technical loss in 2018, with a combined ratio in the region of 120%.

The group, supported by its owners, is committed to improving financial performance and to that end, is implementing a repositioning exercise to focus on profitable lines. The exercise is expected to increase StarStones weighting to casualty lines. Achieving sustainable profitable results is likely to remain a challenge given the strong competition in its main business lines, and there are risks associated with a major reorganisation. Nevertheless, the exercise is expected to have a positive impact on performance.

Since its inception in 2008, StarStone has built scale through a combination of acquisitions of businesses and teams, and organic growth. As a result, StarStone now writes a diversified specialist portfolio from operations in London, Bermuda, the United States and Continental Europe.

A.M. Best notes the high degree of senior management turnover in recent years, which is an offsetting factor in the assessment.

This press release relates to Credit Ratings that have been published on A.M. Bests website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Bests Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Bests Credit Ratings. For information on the proper media use of Bests Credit Ratings and A.M. Best press releases, please view Guide for Media – Proper Use of Bests Credit Ratings and A.M. Best Rating Action Press Releases.

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A.M. Best
Anthony Silverman
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