A.M. Best Affirms Issuer Credit Rating of Maiden Re – ARI Reinsurance Trust Agreement

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has affirmed the issuer credit rating of “aa” of the Maiden Re – ARI Reinsurance Trust Agreement (trust) dated January 1, 2010, between Maiden Reinsurance Company (Maiden Re), a corporation organized under the laws of the State of Missouri (the Grantor), ARI Mutual Insurance Company and ARI Casualty Company (ARI), both corporations organized under the laws of the State of New Jersey (the beneficiary) and State Street Bank and Trust Company, a Massachusetts trust company (the trustee). The rating outlook is stable.

The trust collateralizes liabilities assumed by Maiden Re from ARI. Maiden Re and ARI are wholly responsible for determining the liabilities (the collateral base), which consist of case loss reserve, incurred but not reported losses (IBNR) and unearned premiums, net of open balances. As of July 2010, the collateral base of the trust was $22.2 million, which represents the amount ARI expects in the trust to secure payments under various reinsurance agreements with Maiden Re.

As of July 31, 2010, the trust contains investment assets (as reported by the trustee) with total market value greater than or equal to the necessary collateral—an amount determined by dividing the collateral base by a factor (the advance rate) provided by A.M. Best. As long as the market value of the trust assets is greater than or equal to the necessary collateral, the trust will maintain its “aa” rating. If the market value of the assets in the trust is less than the necessary collateral, the amount of the assets must be increased to ensure that the market value of the assets is at least equal to the necessary collateral. The necessary collateral may change from time to time depending on (1) the revision of the collateral base as determined by Maiden Re and ARI, and (2) adjustments to the advance rate for the securities in the trust.

A.M. Best’s rating of the trust considers (1) an evaluation of specific risks, such as market and operational risks, which may affect the value of the assets in the trust; (2) whether the amount in the trust will be sufficient to meet Maiden Re's obligation to pay an amount equal to the collateral base; (3) the duration of the investment asset in the trust; and (4) the uncertainty surrounding the treatment of the trust’s assets in the event of Maiden Re’s impairment or insolvency. A.M. Best is not responsible for (a) determining the adequacy of the collateral base; (b) any errors or miscalculations of the collateral base; or (c) whether the collateral base accurately reflects the current liabilities under the reinsurance treaty between ARI and Maiden Re.

The analytics of the rating addresses “tail risk”—the risk that the value of the trust’s assets falls below the collateral base within a given confidence interval. A.M. Best’s methodology, “Assessing the “Tail Risk” of Sidecars” provides the general framework and guidance regarding the rating criteria and analytics that apply to this rating.

For access to special reports, analytical methodologies and transactions relating to insurance-linked securities, please visit http://www3.ambest.com/sfc/.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology - Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed, and can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

CONTACT:

A.M. Best Co.
Analysts
Emmanuel Modu, 908-439-2200, ext. 5356
emmanuel.modu@ambest.com
or
Elmo Chin, 908-439-2200, ext. 5227
elmo.chin@ambest.com
or
Public Relations
Rachelle Morrow, 908-439-2200, ext. 5378
rachelle.morrow@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
james.peavy@ambest.com

KEYWORDS:   United States  Europe  North America  New Jersey

INDUSTRY KEYWORDS:   Professional Services  Banking  Finance  Insurance

MEDIA:

Logo