Hamilton Re’s ability to take underwriting and investment risks in a “measured and balanced way” is one of the reasons cited by Kroll Bond Rating Agency in giving the Bermudian reinsurer a financial strength rating of A.

KBRA’s report commentary states that Hamilton Re made an underwriting loss in 2016 and 2017, but the company had consistently been profitable.

Last year, privately held Hamilton racked up more than $100 million in losses related to severe events such as hurricanes Harvey, Irma and Maria, KBRA said.

Despite these losses, the company has been profitable, the rating agency added.

“However, these underwriting losses were within their risk tolerances and were lower than most of their peers, relative to the 100-year PML [probable maximum loss],” KBRA stated. “A significant underwriting loss is expected again in 2018.

“However, investment income during these periods has been sufficient to offset underwriting losses, resulting in net income.”

Hamilton’s investments are managed by Two Sigma, a technology and data company focused on investment management and data science, via the TS Hamilton Fund, KBRA said.

“According to KBRA’s analysis of the TS Hamilton Fund, the underlying investments, on a weighted average basis, are weighted towards globally listed equity securities with the balance focused on futures, futures options and foreign currency options.

“KBRA believes that funds comprised of these asset classes tend to be vulnerable to market fluctuations. However, KBRA ’s assessment is that the overall quality of the TS Hamilton Fund is supportive of the ratings due to its strong liquidity profile as well as meaningful allocation s to government securities, cash and fixed-income securities.”

KBRA cited Hamilton Re’s “sound financial condition, diversified risk profile and seasoned management team” as support for the A rating.

Hamilton Re maintains a conservative risk profile, the agency added, limiting PML to 15 per cent of shareholder’s equity in the US and 10 per cent for the rest of the world.

“Operations are further supported by strong liquidity that is able to accommodate unforeseen cash demands without the need to liquidate invested assets.

“Balancing these strengths is significant execution risk for planned business initiatives, including further development of Hamilton’s capital markets capabilities and the launch of Hamilton Re US, planned for first quarter 2019.”

KBRA also assigned an issuer rating of BBB+ to Hamilton Insurance Group, the parent company of Hamilton Re. The outlook for both ratings is stable.