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Validus core, AlphaCat third-party capital access a benefit, to AIG: S&P


Rating agency Standard & Poor’s has upgraded AIG’s reinsurance unit Validus Re to ‘A+’ from ‘A’, saying that the Validus operation is now considered “core” to AIG’s operations and adding that the access to third-party capital markets the parent gets through AlphaCat Managers is another benefit.

AIG logo“We now consider Validus Reinsurance Ltd. and Validus Reinsurance (Switzerland) Ltd. (collectively, Validus) to be core to parent American International Group Inc.,” S&P explained.

The company has therefore raised its ratings on Validus to ‘A+’ from ‘A’, although left them on CreditWatch with negative implications, aligned with the parent AIG and its other core property & casualty (P&C) operating companies.

The ratings upgrade applies to both Validus Reinsurance Ltd. and Validus Reinsurance (Switzerland) Ltd. and S&P said reflect its, “revised view of Validus’ group status as core to its ultimate parent, AIG, rather than highly strategically important.”

Ever since AIG acquired Validus back in 2018, S&P says the reinsurance specialist unit has brought AIG “attractive diversification benefits, complementary capabilities, and capital efficiencies.”

Now, Validus is well integrated, both operationally and strategically, and is a key piece of AIG’s reinsurance strategy, S&P explained.

In fact, S&P believes that following the disposal of AIG’s life and retirement operations, its P&C reinsurance operations are set to become an even more important part of the group’s strategy.

“Validus has diversified business operations with a strong presence in the global reinsurance market. We expect the company will benefit from AIG’s global presence, its long-standing relationships with its intermediaries, and its larger balance sheet,” S&P explained.

While at the same time, AIG is set to benefit from Validus’ research capabilities, which have always been known as advanced in the industry.

While on the capital efficiency front, the fact AIG also has its own insurance-linked securities (ILS) focused unit, in AlphaCat Managers, is seen as a benefit as well.

The AlphaCat platform provides AIG with “enhanced access to third-party capital markets” S&P explains, another key benefit to the overall insurance and reinsurance group.

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