A.M. Best Affirms Credit Ratings of StarStone Insurance Bermuda Limited and Its Subsidiaries

LONDON–(BUSINESS WIRE)–A.M. Best has affirmed the Financial Strength Rating of A-
(Excellent) and the Long-Term Issuer Credit Ratings of “a-” of StarStone
Insurance Bermuda Limited (StarStone) (Bermuda) and its
subsidiaries, StarStone Insurance SE (Liechtenstein), StarStone
Specialty Insurance Company (StarStone Specialty) and StarStone National
Insurance Company (StarStone National). The outlook of these Credit
Ratings (ratings) remains stable. StarStone Specialty and StarStone
National are domiciled in Wilmington, Delaware, USA.

The ratings reflect StarStone’s consolidated balance sheet strength,
which A.M. Best categorises as very strong, as well as its marginal
operating performance, neutral business profile and appropriate
enterprise risk management. The ratings also benefit from the support of
Enstar Group Limited (Enstar) and the Trident Funds, managed by Stone
Point Capital LLC (Stone Point) which, taken together, own 98.3% of the
group. The owners provide strategic and operational support to
StarStone, as well as financial assistance if needed, as demonstrated by
a planned capital injection by the end of December 2018. Both companies
have a proven track record of building strong and profitable insurance
businesses, Enstar primarily in run-off insurance and Stone Point in
active underwriting.

StarStone’s consolidated risk-adjusted capitalisation, as measured by
Best’s Capital Adequacy Ratio (BCAR), is expected to be at the strongest
level at year-end 2018, with the planned capital injection offsetting
the impact of strong growth in net written premiums and expected losses
during the year. BCAR scores are projected to strengthen in 2019 and
2020, as the result of a planned decline in premium income as the group
carries out a repositioning exercise to focus on profitable lines. A
degree of uncertainty around reserve adequacy and an increase in
investment risk are offsetting factors for the balance sheet strength

After a period of improving performance, which saw StarStone report
modest underwriting profits in 2015 and 2016 after several years of
losses, the group reported an underwriting loss in 2017, largely as a
result of claims from the Hurricanes Harvey, Irma and Maria catastrophe
events. The five-year average combined ratio to December 2017 is 103%.
In addition, StarStone’s 2018 performance has been affected by higher
attritional losses across the marine, casualty and property lines, and a
generally elevated level of large loss activity. As a result, A.M. Best
expects a significant technical loss in 2018, with a combined ratio in
the region of 120%.

The group, supported by its owners, is committed to improving financial
performance and to that end, is implementing a repositioning exercise to
focus on profitable lines. The exercise is expected to increase
StarStone’s weighting to casualty lines. Achieving sustainable
profitable results is likely to remain a challenge given the strong
competition in its main business lines, and there are risks associated
with a major reorganisation. Nevertheless, the exercise is expected to
have a positive impact on performance.

Since its inception in 2008, StarStone has built scale through a
combination of acquisitions of businesses and teams, and organic growth.
As a result, StarStone now writes a diversified specialist portfolio
from operations in London, Bermuda, the United States and Continental

A.M. Best notes the high degree of senior management turnover in recent
years, which is an offsetting factor in the assessment.

This press release relates to Credit Ratings that have been published
on A.M. Best’s website. For all rating information relating to the
release and pertinent disclosures, including details of the office
responsible for issuing each of the individual ratings referenced in
this release, please see A.M. Best’s
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Best’s Credit Ratings
. For information on the proper media
use of Best’s Credit Ratings and A.M. Best press releases, please view
for Media – Proper Use of Best’s Credit Ratings and A.M. Best Rating
Action Press Releases

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