OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has assigned a financial strength rating of B++ (Good) and an issuer credit rating of “bbb+” to Austral Resseguradora S.A. (Austral Re) (Brazil). The outlook assigned to both ratings is stable.
The ratings reflect Austral Re’s sound risk-adjusted capitalization, comprehensive retrocessional program and the successful implementation of the company’s business plan. Austral Re, which is in its first several years of operations, has produced positive overall earnings driven by a steady stream of investment income that has allowed the company to grow surplus through retained earnings.
Austral Re is registered as a local reinsurer in Brazil, which affords it greater access to business when compared with reinsurers licensed as admitted or occasional. The company has begun to position itself as an agile indigenous treaty writer with a focus on service and technology to provide risk management solutions.
Partially offsetting these positive rating factors is Austral Re's limited operating history and developing business profile, as well as the operational uncertainty the company faces in its initial years of operation. Furthermore, the Brazilian (re)insurance market is highly competitive with indigenous and global reinsurers continuing to enter the market. The high level of competition is driven by the significant growth potential of the Brazilian market, which is the largest reinsurance market in Latin America and the world’s seventh largest economy.
A.M. Best will closely follow Austral Re's operating performance, risk-adjusted capitalization and the execution of its business plan and risk management program. Factors that could lead to positive rating actions include stable risk-adjusted capitalization, underwriting results and operating performance, along with the development of a strong business profile within the Brazilian market. Negative rating triggers would include a decline in risk-adjusted capitalization, inconsistent operating results or poor execution of Austral Re's proposed business plan.
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.
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