MOODY'S RATES THE CENTRE GROUP Aa3 FOR INSURANCE FINANCIAL STRENGTH
Moody's Investors Service has rated the Centre Group Aa3 for insurance financial strength. Formed in 1988, the Centre group of companies is wholly owned by Zurich Insurance Company (insurance financial strength rating of Aa1) and ultimately, by the Zurich Financial Services Group. The Centre companies form the business unit within Zurich charged with creating non-traditional insurance and financial solutions for clients.
According to Moody's, its rating reflects Centre's established position within the finite risk reinsurance field, its diverse and experienced professional staff, prudent risk controls and advanced quantitative modeling skills. The rating considers Centre's relationship with Zurich, but is based primarily on the company's own credit strengths. Finite risk transactions are characterized by deals that involve, from an underwriting perspective, limited upside or downside potential. Multi-year contracts with aggregate limits and profit sharing are typical of transactions deemed to be finite risk. Regardless of the underlying business area, virtually all Centre deals have similar characteristics, including i) highly customized and structured solutions, ii) multiple year contracts that align the cedant's interests with those of Centre, iii) aggregate limits that protect Centre from unexpectedly large losses, and iv) extensive analytical modeling to gauge the appropriate premium and contract structure.
Tempering these credit strengths, Moody's noted, are the companies' relatively concentrated revenue base and risks stemming from its reliance on quantitative analyses. The Centre Group binds a relatively limited number of new contracts each year. Although this number has grown steadily since its inception, top-line growth could be subject to fluctuation should that number decline due to changing market conditions or clients. Moreover, to avoid erosion of its profit margins, Centre has begun to expand into fields outside of insurance. Structured finance transactions, credit enhancement, residual value insurance, and life/health opportunities account for the bulk of the new business being generated. This drive to stay at the leading edge of reinsurance brings risk and rewards. The rewards include typically higher profit margins and better deal selection than most reinsurance companies. The risks include increased parameter risk in the company's modeling process, uncertain levels of correlation among its disparate deal types, and increasing challenges with monitoring capital adequacy. Centre's consistent framework for structuring deals and its emphasis on exhaustive modeling help to mitigate these risks. Moody's will continue to evaluate the appropriateness of its rating as the company's portfolio matures and these risks diminish.
The following ratings were assigned:
Centre Solutions (Bermuda) Limited, Insurance Financial Strength of Aa3;
Centre Reinsurance Limited, Insurance Financial Strength of Aa3;
Centre Solutions (US) Limited, Insurance Financial Strength of Aa3;
Centre Insurance International Company, Insurance Financial Strength of Aa3;
Centre Reinsurance International Company, Insurance Financial Strength of Aa3;
Centre Insurance Company, Insurance Financial Strength of Aa3;
ZC Specialty Insurance Company, Insurance Financial Strength of Aa3;
Centre Life Insurance Company, Insurance Financial Strength of Aa3;
Centre Solutions (Asia) Limited, Insurance Financial Strength of Aa3.
The Centre Group employ roughly 300 individuals worldwide and maintains underwriting offices in the United States, Bermuda, and Ireland. The company has branch offices in several additional locations throughout the world, and is expecting to open another underwriting office in Asia in the near future.
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