Rating agency A.M. Best has highlighted the importance of diversification, in terms of line of business, primary insurance and reinsurance, and global locations, as a key strength of Validus Group.
It’s a sign of the increasing importance of diversified business models for global reinsurance firms, as the softened market requires steps be taken to ensure access to risk is maintained and made more efficient.
That requires broad diversification in terms of line of business, operations in both insurance and reinsurance and global offices to enhance access to regional risks. Validus has all of these and A.M. Best notes how important they are.
The rating agency notes the importance of Validus’ primary platform, highlighting the “strategic importance to the group” of Western World Insurance Company, Stratford Insurance Company and Tudor Insurance Company.
As part of a globally diversified re/insurance player the benefits also flow back to the primary entities which all receive “explicit support” through a quota-share reinsurance arrangement with Validus Re.
A.M. Best also notes the importance of Validus’ Switzerland office and platform, saying it has “strategic importance, as the platform by which Validus Re has expanded and enhanced its business profile in recent years.”
Line of business diversification is also key to large, global reinsurance players, which A.M. Best recognises.
“Validus Re has enhanced the business profile of the group by diversifying the company’s revenues to include other lines of business,” the rating agency says, noting the expansion into excess and surplus lines through Western World Insurance Company.
“Further diversification will be achieved following the announcement of the company’s intended purchase of Crop Risk Services, expected to close in the second quarter of 2017,” the rating agency notes.
A.M. Best affirmed all of Validus’ ratings and has them on a positive outlook, with these elements of diversified growth all key to that perception it appears.
It underscores the need for reinsurers to achieve a sustainable level of scale and diversity in the currently challenging reinsurance market, something Validus has taken steps to ensure.
