AM Best has affirmed the financial strength rating of ‘A’ (Excellent) and the long-term issuer credit rating of ‘a’ (Excellent) for Bermuda-based reinsurer Lumen Re.
The outlook for both ratings remains ‘stable’.
The ratings reflect Lumen Re’s balance sheet strength, which AM Best evaluates as the strongest level, alongside adequate operating performance, a limited business profile and appropriate enterprise risk management (ERM).
The company’s liquidity, asset quality, asset/liability management and use of internal capital models further support its balance sheet strength.
The reinsurer also uses fully collateralised third-party retrocession to reduce exposure to losses and credit risk. Although its leverage ratio, based on retained limits to equity, has increased, it remains low.
Lumen Re has renewed its designation as a reciprocal jurisdiction reinsurer in 37 US states for 2025, which is expected to lower operational burden and costs.
Given current market conditions, AM Best expects the reinsurer’s operating performance to remain favourable.
Lumen Re’s business profile continues to be assessed as limited, as it primarily writes catastrophe excess of loss contracts and a small number of reinsurance protection programmes.
The company partners with established cedants in mature markets, and mitigates product concentration risk through diversification across regions, perils and cedants.
Its pricing strategy is supported by strong modelling capabilities, including both vendor and independent tools, and by coverage exclusions for start-ups.
Lumen Re’s ERM is deemed appropriate, with a structured framework and governance processes in place to identify, monitor and report on underwriting, investment and other relevant risks.
