AM Best has placed Tower Insurance’s A- financial strength rating under review after parent company Tower Ltd agreed to Fairfax Financial Holdings’ $NZ197 million ($184.4 million) acquisition bid.

The ratings agency says the review will stand until the transaction closes and it completes its discussions with Canada-based Fairfax’s management.

“Any potential ratings impact from actual or anticipated changes to [the Tower businesses’] credit profiles also will be assessed,” AM Best said.

“Additionally, AM Best will factor its view of the extent of Fairfax’s financial support into the final rating determination.”

Tower Chairman Michael Stiassny says the rating action was expected. “An out-of-cycle rating review is standard business practice in the event a company is in play.”

Tower Ltd has appointed Northington Partners to prepare an independent adviser’s report on Fairfax’s offer of $NZ1.17 ($1.09) per share.

Shareholders will soon receive scheme documentation that will include the board’s recommendation and a summary of the adviser’s report.

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