Stoneheath Re ‘reliant on XL’ to provide significant proportion of preferred dividends via reinsurance

Fitch Ratings has affirmed and removed from rating watch negative Stoneheath Re's Issuer Default Rating (BBB+) and debt ratings. The rating outlook is Negative.

The rating action follows Fitch's recent assessment of XL. Given XL's unilateral flexibility in modifying the terms of the reinsurance agreement with Stoneheath Re as well as Stoneheath Re's reliance on XL to provide a significant portion of the preferred dividends via reinsurance payments, Stoneheath Re's non-cumulative perpetual preferred securities are rated equivalent to XL's existing cumulative preferred shares. The series D preference ordinary shares rank pari passu with XL's outstanding cumulative preferred shares, which were affirmed at 'BBB-'.

Stoneheath Re is a Cayman Islands exempted company formed solely to issue the non-cumulative perpetual preferred securities, enter into a reinsurance agreement with certain operating subsidiaries of XL, a Bermuda-based holding company organised under the laws of the Cayman Islands, and conduct activities related to the securities' issuance.