Weston2038 credit-linked notes ratings affirmed by AM Best with stable outlook

Traders Union
All News
Financial News
Weston2038 notes ratings affirmed

Highlights

AM Best affirmed the 'a' (Excellent) credit rating with stable outlook on Weston2038 LLC’s $846 million and $433 million 6.00% credit-linked notes, with $407 million and $621 million outstanding as of March 31, 2026.
Ratings reflect Hannover Life Reassurance Company of America (Bermuda) Ltd.’s 'aa' and Wilton Reassurance’s 'aa-' credit ratings, netting arrangements, and reliance on funds from Redding Re 3, alongside legal enforceability considerations.
Affirmation indicates ongoing stability in the life reinsurance market’s reserve financing segment, though credit ratings could change with significant shifts in the financial profiles of Hannover Life Re or Wilton Re Group.

Life insurance reserve structure and rating rationale

As reported by AM Best, the rating agency has affirmed the Long-Term Issue Credit Rating of “a” (Excellent) on Weston2038 LLC’s $846 million 6.00% Series Hannover, No. 1 variable funding credit-linked note, of which $407 million remained outstanding as of March 31, 2026, and on the $433 million 6.00% Series Hannover, No. 2 variable funding credit-linked note, which increased to $621 million outstanding as of the same date. Both notes carry a stable outlook and mature on July 1, 2038 and July 1, 2043, respectively.

The two notes are linked to variable funding surplus notes issued by Redding Reassurance Company 3 LLC, a Missouri special purpose financial captive reinsurer and wholly owned subsidiary of Wilton Reassurance Company. These instruments support excess reserves tied to blocks of life insurance business retroceded by Wilton Reassurance, with each surplus note sized within 100% to 102% of the corresponding excess reserve balance and matched to the face amount of the related credit-linked note.

For Block 1, Wilton Reassurance retrocedes a specified block of level term and universal life secondary guaranty business on a coinsurance basis to Redding Re 3. For Block 2, it retrocedes a specified block of universal life secondary guaranty policies on a coinsurance funds withheld basis.

AM Best says the rating action reflects Hannover Life Reassurance Company of America (Bermuda) Ltd.’s “aa” (Superior) Long-Term Issuer Credit Rating as swap counterparty, Wilton Reassurance’s “aa-” (Superior) Long-Term Issuer Credit Rating, netting arrangements among transaction parties, the absence of reserves or funds at Weston2038 beyond reliance on funds provided by Redding Re 3, and potential legal risks tied to the enforceability of transaction agreements. The agency also notes that, as of December 2025, statutory reserves, economic reserves and excess reserves for the underlying business in both blocks are in line with projected results.

Implications for investors and reinsurance markets

The notes and corresponding surplus notes for both blocks carry the same interest rate, and Weston2038 has entered into cash-settled ISDA swap-based risk transfer agreements with Hannover Life Re America (Bermuda) to provide liquidity in the event of redemption or monetization of the credit-linked notes. That structure is central to the issuer’s ability to meet obligations to noteholders when due, which AM Best says is the core focus of the rating action.

The affirmation signals continued stability for a specialized segment of the life reinsurance and insurance-linked financing market, where captive reinsurers and surplus note structures are used to support reserve financing for long-duration life insurance liabilities. AM Best says the Long-Term Issue Credit Ratings or outlook could still change if material shifts occur in the financial condition or ratings of Hannover Life Re America (Bermuda) or Wilton Re Group.

Our earlier article covered AM Best’s ratings on Prudential Financial’s new long-dated debt, including a “bbb” (Good) Long-Term Issue Credit Rating on its $750 million 6.25% junior subordinated notes due 2056, alongside an “aa-” (Superior) rating on PRICOA Global Funding I’s $450 million notes due 2031—both with Stable Outlooks. We also noted the expected use of proceeds, which may include repurchasing Prudential’s outstanding junior subordinated notes due 2047, and highlighted how leverage, interest coverage, and parent-level liquidity factor into the agency’s assessment.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.