James River Group Holdings, Ltd. has announced that effective January 1st, 2018, the firm will restructure its internal quota share to be ceded to Carolina Re Ltd., a newly established Bermuda Class 3A re/insurer.
The restructuring steps taken by James River Group is in response to the introduction of the Tax Cuts and Jobs Act of 2017, and Carolina Re will make a 953(d) election to become a U.S. corporate tax payer.
Previously, the cession was received by the firm’s reinsurance arm, JRG Reinsurance Company, Ltd., and the firm states in its Q4 2017 earnings release that it doesn’t expect its third-party casualty reinsurance business to be impacted by the introduction of the Tax Cuts and Jobs Act of 2017.
Global ratings agency A.M. Best has commented on the credit ratings of JRG Reinsurance Company and its affiliates in light of the announced restructuring.
The ratings agency has commented that the Long-Term Issuer Credit Rating of ‘bbb’ of James River Group Holdings, and the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of ‘a’ of JRG Reinsurance Company and its U.S. domiciled affiliates, remain unchanged following the announced restructuring.
Furthermore, the outlook of these Credit Ratings remains stable, said A.M. Best.
The ratings agency said that its comments take into consideration the introduction of tax reforms, and also takes into consideration that although JRG Reinsurance will no longer be the internal reinsurer, it will continue to underwrite third-party casualty reinsurance.
“A.M. Best will continue to monitor the progress of the modifications of the internal reinsurance programs, and evaluate any developments and implications for impact on the ratings,” said the ratings agency.
During the James River Group earnings call today, the company also revealed that the new subsidiary, Carolina Re, would enter into a stop-loss arrangement with an existing Bermuda subsidiary, effectively transferring profits from Carolina Re to Bermuda, which the Group expects will help it better manage its tax rate.
