MEXICO CITY--(BUSINESS WIRE)--A.M. Best has upgraded the financial strength rating to A (Excellent) from A- (Excellent) and the issuer credit rating to “a” from “a-” of Barents Re Reinsurance Company Inc. (Barents Re) (Panama City, Panama). The outlook for both ratings was revised to stable from positive.
The upgrade reflects Barents Re’s strong operating performance registered as the company achieved its geographic diversification goals and maintained conservative retention levels supported by a solid retrocession program. In addition, the company has been able to grow its capital base through substantial capital contributions from its holding company during the past two years and through good profitability levels. As a result, Barents Re has attained outstanding risk-adjusted capitalization levels, according to Best’s Capital Adequacy Ratio (BCAR).
Barents Re achieved its targeted geographical distribution during 2014 by further expanding into Europe while maintaining a conservative retention profile and strong underwriting practices. While the geographic mix of its portfolio experienced considerable changes due to new businesses in the European region, the short-tail nature of the risks reinsured and its solid retrocession reinsurance program set the basis for the profitable development of its operations, which at year-end 2014 amounted for 49% of its gross written premiums. Retained premiums are distributed 41% in Europe, 33% in Latin America and 27% in MENA/Asia. Business lines do not present significant concentrations.
In line with its risk appetite and tolerance, Barents Re possesses strong enterprise risk management practices that allow the company to closely follow emerging risks in all the areas of its operations, in conjunction with the development of its internal economic capital model. A.M. Best believes Barents Re is prepared to assess potential risks related with further growth and expansion into new products or regions, based on a good track record in terms of bottom line results for the past five years. Investment policy within the company is conservative and has resulted in constant positive yields that support the company’s operating performance.
In terms of profitability, Barents Re has maintained a solid return on assets and on surplus despite the strong capital contributions it has received during the past two years, standing at 8.9% and 11.1%, respectively. Barents Re’s strong risk-adjusted capitalization stands as one of the main drivers for the ratings due to an outstanding capital base backed by support from its holding company, as well as good profitability levels. In addition, Barents Re’s underwriting leverage of 63% at year-end 2014 compares favorably with its peers.
A.M. Best feels that Barents Re is well-positioned at its current rating level. The stable outlook is based on A.M. Best’s expectation that the company will continue to register good profitability levels while maintaining strong risk-adjusted capitalization and further stabilizing its operation worldwide. Factors that may lead to negative rating actions include rapid growth into lines of business with high risk profile that result in large net losses for the company. In addition, the ratings could be pressured if Barents Re’s risk-adjusted capitalization, according to BCAR, becomes non-supportive of the current ratings.
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:
- Catastrophe Analysis in A.M. Best Ratings
- Evaluating Country Risk
- Insurance Holding Company and Debt Ratings
- Risk Management and the Rating Process for Insurance Companies
- The Treatment of Terrorism Risk in the Rating Evaluation
- Understanding Universal BCAR
View 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: Oct. 22, 2014
- Date of Financial Data Used: June 30, 2015
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