AM Best downgrades Cowen Re’s issuer credit rating

AM Best has downgraded Cowen Reinsurance S.A.’s (Cowen Re) Long-Term Issuer Credit Rating to “bbb” (Good) from “bbb+” (Good) and affirmed its Financial Strength Rating of B++ (Good).

The credit rating agency has also maintained the under review with negative implications status for these ratings.

The ratings reflect Cowen Re’s balance sheet strength, assessed as very strong by AM Best, as well as its marginal operating performance, limited business profile, and appropriate enterprise risk management (ERM).

The downgrade is driven by Cowen Re’s poor operating performance track record. Since its launch in 2016, the company has reported cumulative technical losses, largely offset by investment gains. Its five-year weighted average combined ratio stood at 122.9%.

Additionally, Cowen Re is only renewing existing programmes and is not underwriting new business due to an ongoing sale process initiated after its acquisition by Toronto-Dominion Bank (TD Bank) in March 2023.

In June 2023, AM Best initially placed the ratings under review due to uncertainty regarding Cowen Re’s future ownership. The agency does not expect the company to be part of TD Bank’s long-term plans. The negative implications also reflect uncertainty about Cowen Re’s strategic plans and the decline in its business profile given its inability to underwrite new business.

While the company reported a pre-tax profit of $9.95 million in 2024, primarily from investment income, technical performance remained under pressure, with a combined ratio of 118.4% at year-end.

The resolution of TD Bank’s plans for the company has taken longer than AM Best initially anticipated. The ratings will remain under review with negative implications until there is clarity on the company’s long-term ownership and business plans.

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