MEXICO CITY--(BUSINESS WIRE)--A.M. Best has assigned a Financial Strength Rating of A+ (Superior), a Long-Term Issuer Credit Rating of “aa-” and a Mexico National Scale Rating of “aaa.MX” to Berkley International Fianzas Mexico S.A. (BFM) (Mexico City, Mexico). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect BFM’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings of BFM also reflect its affiliation with its parent company W.R. Berkley Corporation (W. R. Berkley) in terms of underwriting, reinsurance protection, ERM and capital commitments. Limiting the ratings is the inherent risk of a startup company implementing its business plan and the potential volatility of Mexico’s economy during 2018.
BFM is the Mexico surety subsidiary of W. R. Berkley, formed in November 2016; the company received regulatory approval for operations in June 2017 and issued its first policy that same month. The company plans to develop a regional presence in northwest Mexico, through a predominant mix of administrative surety and a lesser portion of credit and judicial products strongly backed up by a comprehensive reinsurance contract with its parent company.
BFM’s very strong balance sheet assessment is derived from its strong capital position in support of its premium growth during its first years of operation, which is further strengthened by the comprehensive reinsurance contract with its parent company. Furthermore, A.M. Best recognizes W.R. Berkley’s commitment to its subsidiaries providing additional capital fungibility to the Mexico operation.
The marginal assessment on operating performance is due to the start-up nature of the company and its lack of a track record. While the BFM management and underwriting team have a successful track record of their own, the business plan implementation has to evolve for A.M. Best to adequately evaluate the company’s operating performance.
As of June 2017, the surety market decreased 0.4% in real terms due to less public spending on infrastructure projects and an economic environment for investments that has remained slow. These conditions could continue amid possible economic volatility in 2018 during the country’s presidential campaigns and voting results, which could potentially limit the growth prospects of the company.
Positive rating actions could mirror those of its group if the subsidiary is able to achieve its commercial goals while posting sound operating performance and maintaining its very strong balance sheet assessment. Negative rating actions could take place if the company’s financial performance impacts its capital or if premium volume is no longer supported by its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR).
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:
- Evaluating Country Risk (Version Oct. 13, 2017)
- Understanding Universal BCAR (Version Oct. 13, 2017)
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- Rating New Company Formations (Version Oct. 13, 2017)
- A.M Best Ratings on a National Scale (Version Oct. 13, 2017)
- Rating Surety Companies (Version Oct. 13, 2017)
View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, please refer to Understanding Best’s Credit Ratings.
- Previous Rating Date: Not Rated
- Date of Financial Data Used: December 31, 2017.
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