MEXICO CITY--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Maxseguros EPM Ltd. (Maxseguros) (Bermuda). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Maxseguros’ balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The ratings also reflect Maxseguros’ strong risk-adjusted capitalization, supported by a comprehensive and adequate reinsurance program coupled with a conservative investment policy and limited premium risk exposure. The ratings recognize the important role of the company within its corporate parent structure, Empresas Públicas de Medellin E.S.P. (EPM), which is owned by the Colombian municipality of Medellin. EPM is the largest power generation and multi-utility company in Colombia. Maxseguros is a single-parent captive insurer wholly owned by EPM and provides reinsurance to the EPM group, covering property damage and business interruption, commercial crime, construction all risk, cyber risk, directors and officers, errors and omissions and general liability exposures.
These positive rating factors are offset partially by EPM’s substantial financial leverage and Maxseguros’ limited business and market scope, which is somewhat mitigated by the company’s stable results, favorable geographic spread of risk and the history of Maxseguros’ growing surplus position. Additionally, while Maxseguros depends on reinsurance, EPM’s senior management is involved intimately in the captive’s operations.
The stable outlooks are derived from Maxseguros’ ability to sustain an adequate level of operating performance due to its demonstrated risk management expertise and conservative underwriting criteria. This held true during the last three years, when the company presented net claims while producing constant and increasing positive bottom line results. AM Best has a favorable view of Maxseguros’ overall profile within the ultimate parent’s structure; however, EPM’s credit profile and financial leverage remain key factors for future reviews on Maxseguros.
Negative rating actions could occur if the credit profile of EPM becomes pressured by its financial leverage and interest coverage metrics, affecting Maxseguros profile. Additionally, negative rating actions could also arise if underwriting performance presents volatility affecting earnings and capitalization over time, or if there is a material shift in risk profile that potentially could undermine the stability and profitability of the company. Positive rating triggers could include sustained positive operating results and improved risk-adjusted capitalization, as well as excellent claim management.
AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
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