Best Lowers Rating Of Top Layer Re

NU Online News Service, March 4, 11:40 a.m.EST?Insurance rating company A.M. Best Co. said it haslowered the financial strength rating of Bermuda-based Top LayerReinsurance Ltd. to "A-plus" (Superior) from "A-double-plus"(Superior), but maintained a stable outlook on the company.

Oldwick, N.J.-based Best said the lowering of the rating was aresult of the rating action recently taken by it on State FarmMutual Automobile Insurance Co., based in Bloomington, Ill., rated"A-double-plus" [Superior], a 50 percent joint owner of thecompany, along with Renaissance Reinsurance Ltd., rated "A-plus"[Superior], of Bermuda.

Best said it affirmed the financial strength rating of"A-double-plus" [Superior] of State Farm, but assigned it anegative outlook reflecting uncertainties relating to severalissues, including its prospective operating performance and itssignificant exposure to equity market volatility.

Best said it believes the credit quality of Top Layer's mostsignificant backer has been modestly reduced and, as such, haslowered Top Layer's rating to below the "A-double-plus" [Superior]level.

On a stand-alone basis, Best continued, Top Layer is modestlycapitalized respective to the high excess layers of propertycatastrophe risks it assumes, and its rating is materiallydependent upon reinsurance protections it receives from State Farmand, to a much lesser degree, RenaissanceRe.

State Farm provides Top Layer with $3.9 billion excess of $100million stop-loss reinsurance protection, which includes acut-through agreement to meet policyholder obligations should TopLayer become insolvent. Top Layer is also supported by letters ofcredit from State Farm and RenaissanceRe totaling $75 million andthe ability to make a capital call to these companies each fiscalyear for up to $100 million, according to Best.

Despite this action, Best said, the company's rating is still atthe superior level, reflecting the continued financial strength ofState Farm along with Top Layer's track record of outstandingoperating results attributable to RenaissanceRe, which underwritesall risks undertaken by the company.