OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” of BMO Reinsurance Limited (BMO Re) (Barbados). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect BMO Re’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
BMO Re is an indirect wholly owned subsidiary of Bank of Montreal (BMO) and until recently had four underwriting programs in place, including creditor and life reinsurance, property catastrophe, specialty property and casualty. In 2019, the company decided to exit the property catastrophe and specialty property and casualty business due to several years of fluctuating results. Going forward the company will focus on its core product of assumed credit life business. The ratings of BMO Re reflect its stable net income trends, strong return on equity and strong liquidity. In addition, BMO Re continues to maintain the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as low levels of credit risk within its investment portfolio, which is invested primarily in highly rated sovereigns, supranationals and corporate bonds.
While recognizing the strength of the ownership relationship with BMO, AM Best notes that volatility in Canada’s economy following the COVID-19 pandemic, along with the banking industry’s move to digital transactions and losing face-to-face sales opportunities, will likely continue to impact the creditor life insurance market and BMO Re’s ability to grow premium. AM Best also notes that the company has remained highly profitable overall during the previous three years despite volatile property and casualty results, reflecting solid underwriting in the core creditor reinsurance business line, which is expected to continue.
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