White Mountains unit retains Best rating

A.M. Best won’t downgrade its rating of White Mountains Insurance Group’s Folksamerica reinsurance subsidiary, despite an unexpected $203 million hurricane-related loss that led to the collapse of the subsidiary’s “sidecar,” Olympus.

After a two-month review, the rating agency said that while it remains concerned about the Folksamerica catastrophe exposure, it said that Folksamerica capital levels were excellent and will continue the subsidiary’s A- rating.

White Mountains created Olympus as a third-party “sidecar” in 2001 to take advantage of the hot catastrophe reinsurance market in the wake of the September 11th terrorists attacks. Folksamerica would cede Olympus much of this business, but would capture administrative and marketing fees, while Olympus carried the risk.

However, when Olympus couldn’t handle the unexpected loss from the triple storms in 2005, Folksamerica agreed to spend $139 million to bail it out, prompting the AM Best probe.

In other news, White Mountains said last week that its OneBeacon subsidiary agreed to sell its agricultural insurance business to Australia’s QBE Insurance Group for $32 million. Last month, White Mountains announced that it intends to take up to $500 million of the stock public under the sticker symbol OB, but it plans to continue to own and control most of the company.

White Mountain is a Bermuda-domiciled company that recently moved its U.S. headquarters to New Jersey, but it still retains an administrative office in Hanover, N.H. – BOB SANDERS

Categories: News