Fitch Affirms Black Gold Re Ltd. at 'BBB+' and 'AAA(col)'; Outlook Stable

NEW YORK--()--Fitch Ratings has affirmed Black Gold Re LTD's (BGRe) 'BBB+' Insurer Financial Strength (IFS) rating and 'AAA(col)' National Insurer Financial Strength rating. The Rating Outlook is Stable.

KEY RATING DRIVERS

In keeping with Fitch's methodology for rating core captive reinsurance companies, BGRe's rating is in line with that of its parent, Ecopetrol S.A. Ecopetrol has a national local currency long-term rating 'AAA(col)' and an international local currency rating of 'BBB+' with a Stable Outlook.

Fitch categorizes BGRe as a core captive reinsurance company to Ecopetrol based on the operational and financial support of its parent and because it only reinsures risks coming from Grupo Ecopetrol (GE). In addition, the strategy of the captive reinsurer is aligned to the risk management of GE, and the economic value of this activity is reflected in savings in the assurance process of Ecopetrol.

BGRe is a captive reinsurer domiciled in Bermuda that only engages in reinsuring risks of Ecopetrol and its subsidiaries where it has controlling interest. BGRe works with almost all subsidiaries of Ecopetrol, which confirms that it is a major subsidiary of the group to which it belongs.

BGRe's strategy remains focused on the integration of insurable risks of all companies linked to GE and aims to standardize all processes and procedures related to the transfer and retention of risk. The main purpose of BGRe is to optimize the cost of risk transfer, provide value-added services, and position itself as the captive of all subsidiaries of GE. As of September 2015, the captive records retained earnings amounting US$90.4 million, attributable to the positive internal generation of resources it has had since its inception, which in turn represents savings and benefits produced for GE.

BGRe employs the Ecopetrol Treasury Department for its investment portfolio management. In addition Ecopetrol provides technical and operational support to the captive for its optimum performance through the Risk Financing Coordination. BGRe's capital has doubled in the last five years (USD180 million as of September 2015), mainly due to an internal generation of resources and a conservative policy of maintaining retained earnings. It is expected to strengthen the capital structure in order to provide optimal insurance alternatives in times of stress and tough market conditions.

RATING SENSITIVITIES

The Rating Outlook is Stable. Fitch does not anticipate any changes to the ratings.

An upgrade may be considered if positive changes occur to Ecopetrol's credit profile. Negative changes to Ecopetrol's ratings or to its ability and willingness to provide support could result in a downgrade for BGRe. However, Fitch views the latter as unlikely.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria

Insurance Rating Methodology (pub. 16 Sep 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871172

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=993436

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=993436

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Franklin Santarelli, +1-212-908-0739
Managing Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Milena Carrizosa, +57 1 326-9999 ext 1090
Director
or
Committee Chairperson
Donald Thorpe, +1-312-606-2353
Senior Director
or
Media Relations
Alyssa Castelli, New York, +1-212-908-0540
alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Franklin Santarelli, +1-212-908-0739
Managing Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Milena Carrizosa, +57 1 326-9999 ext 1090
Director
or
Committee Chairperson
Donald Thorpe, +1-312-606-2353
Senior Director
or
Media Relations
Alyssa Castelli, New York, +1-212-908-0540
alyssa.castelli@fitchratings.com