SINGAPORE--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Labuan Reinsurance (L) Ltd (Labuan Re) (Malaysia). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Labuan Re’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Labuan Re’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remains solid. The company maintains a geographically diversified portfolio and is supported by a USD 55 million subordinated bond issue.
Underwriting activity has slowly started to increase again following several years of portfolio remediation, during which the company’s underwriting leverage trended downward. The company has ventured into new lines of business and continues to participate in several Lloyd’s syndicates, which has enabled Labuan Re to diversify its underwriting book to risks outside of Asia.
An offsetting rating factor is potential underwriting volatility stemming from Labuan Re’s Lloyd’s portfolio. Labuan Re’s losses from the recent U.S. hurricanes are not yet fully known, but are expected to have a considerable impact on the company’s results for the year with its combined ratio likely to increase substantially. Due to the nature of its participation in the Lloyd’s syndicates, Labuan Re has limited control over the risks in this portfolio. Additionally, the relatively small size of Labuan Re in the highly competitive reinsurance market also constrains its ability to select risk.
Positive rating actions are unlikely. Negative rating actions could occur if Labuan Re’s business profile weakens or if there is no considerable improvement in its underwriting performance.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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