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Kelvin Re future uncertain, not expected to be in TD Bank’s long-term plans: AM Best


Kelvin Re Limited, the previously ILS capital backed Guernsey based reinsurance company, is not expected to form a part of its new owner TD Bank’s long-term plans, which has led rating agency AM Best to be cautious on the outlook for the company.

kelvin-re-logoKelvin Re used to get its financial support from insurance-linked securities (ILS) investors and funds under the management of Credit Suisse Asset Management’s specialist ILS investment unit.

In this case it was solely backed by investments from the Abu Dhabi Investment Council, a sovereign wealth investor with a liking for reinsurance-linked returns, that had partnered with Credit Suisse on this strategy.

Kelvin Re had been shuttered and underwent run-off process, after suffering heavy catastrophe losses through recent years.

Later, the news eventually broke that Kelvin Re had been sold to New York headquartered financial services group Cowen.

The cost of the acquisition was roughly $220 million after costs, it was revealed in later SEC filings from Cowen.

But, then on March 1st 2023, it was announced that Kelvin Re’s parent, Cowen Inc. was being acquired by The Toronto-Dominion Bank (TD Bank).

Now, AM Best has commented on the reinsurer, saying that while its financial strength has actually improved, the future outlook is uncertain.

AM Best has upgraded Kelvin Re’s Financial Strength Rating to B++ (Good) from B+ (Good) and Long-Term Issuer Credit Rating to “bbb” (Good) from “bbb-” (Good).

The ratings remain under review, but at the same time AM Best has revised the implications status to negative from developing.

The ratings reflect Kelvin Re’s balance sheet strength, which AM Best says is very strong, but at the same time the reinsurer is in an uncertain position.

AM Best also noted that the rating upgrades reflect the removal of ratings drag from Cowen, as Kelvin Re will now be considered a directly owned subsidiary of TD Bank upon completion of the acquisition and the reinsurance firm’s business profile assessment has been revised to very limited, likely as it remains in a run-off status.

However, the reason for the under review with negative implications status, is that Kelvin Re’s future ownership is uncertain, and  AM Best said that it “does not expect the company to form a part of TD Bank’s long-term plans.”

Should Kelvin Re be kept as a run-off structure, AM Best expects that its short-tail book of property-related reserves will develop positively over the coming years.

At the same time, Kelvin Re had capital of US $420 million at year-end 2022 compared with gross insurance reserves of US $158 million, and the reinsurer has sufficient assets held in low risk, liquid investments to adequately cover net reserves, AM Best said.

With Kelvin Re’s ownership uncertain now, there is also a chance someone could look to acquire the reinsurer to rekindle its fortunes, as it was a rated reinsurance entity that could prove attractive to some buyers, given its legacy portfolio is expected to run-off positively.

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