MEXICO CITY--(BUSINESS WIRE)--A.M. Best has assigned a financial strength rating (FSR) of A (Excellent), an issuer credit rating (ICR) of “a+” and a Mexico national scale rating of “aaa.MX” to HDI-Gerling de Mexico Seguros, S.A. (HDI-GM) (Mexico City, Mexico). The outlook assigned to all ratings is stable.
The ratings reflect HDI-GM’s substantial reinsurance support from its group through HDI-Gerling Welt Service Aktiengesellschaft (FSR A [Excellent] and ICR “a+”), as well as its integration with its ultimate parent company, HDI Haftpflichtverband der Deutschen Industrie V.a.G (HDI V.a.G.) in terms of the business model and financial support consistently provided over the years.
HDI-GM is a subsidiary of HDI-Gerling America Insurance Company (99.9%) and HDI - Gerling Welt Service AG (0.10%), which are both subsidiaries of HDI V.a.G. The company’s business portfolio is distributed across earthquake (30.14%), inland marine (22.46%), liability (22.11%), fire (21.51%) and engineering risks (3.78%). HDI-GM’s business model consists of very low retention at .05% as of December 2014, which is completely supported by a facultative automatic reinsurance agreement provided by its affiliate and minority shareholder, HDI-Gerling Welt Service AG.
The company’s risk-adjusted capitalization is good and showed a major improvement from 2013 to 2014 after the capital contribution from its group, which represented 42% of the reported capital at year-end 2013. HDI-GM’s exposure to underwriting risks is limited through its reinsurance agreement with HDI-Gerling Welt Service AG, which also renders lower levels of required capital. However, large recoverables from reinsurance are reflected in credit risk; however, this is not a major concern given the counterparty’s excellent level of security and the binding characteristics of the contract towards HDI-GM’s obligations.
During the past two years, the company has maintained positive bottom line results despite volatility in its income statement derived from its small premium retention levels and non-recurrent events. This vulnerability has been offset by the support of its group through the commissions received by ceded reinsurance and by large reinsurance recoveries on claims.
A.M. Best expects HDI-GM’s performance to remain stable with the support provided by HDI V.a.G. and the binding characteristics of its reinsurance contract. If there are positive rating actions on the main operating subsidiaries of HDI V.a.G., the global scale ratings on HDI-GM will move in tandem. Likewise, if there are negative rating actions on HDI V.a.G., the ratings on the Mexican subsidiary will mirror the same adjustments. Additionally, negative rating movements might take place if A.M. Best’s view on reinsurance or capital support by its group deteriorates.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- A.M. Best Ratings On a National Scale
- Catastrophe Analysis in A.M. Best Ratings
- Evaluating Country Risk
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding Universal BCAR
Click here for a general description of the policies and procedures used to determine credit ratings. Also in accordance with Mexican regulations, the following is a link to required disclosures – A.M. Best America Latina Supplementary Disclosure.
- Previous Rating Date: Not rated.
- Date of Financial Data Used: Jun. 30, 2015
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