MEXICO CITY--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of Sura Re Ltd. (Sura Re) (Bermuda). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Sura Re’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
Sura Re is the wholly owned startup captive reinsurer of Suramericana S.A. (Sura), which in turn is 81.1% owned by Grupo de Inversiones Suramericana S.A. The company was established in Bermuda as a Class 3A insurer in December 2015. Its main purpose is to participate in property business underwritten by Sura’s affiliates across Latin America (i.e., Argentina, Brazil, Chile, Colombia, El Salvador, México, Panamá, Dominican Republic and Uruguay). AM Best recognizes the strategic role that Sura Re aims to achieve in Sura’s overall regional strategy; however, Sura Re’s business profile is considered limited given its accessibility to markets when compared with other commercial reinsurers.
AM Best categorizes the company’s balance sheet strength as very strong, as risk-adjusted capitalization is more than adequate for the risks it holds. During 2019, capital requirements reflected lower credit risk as a premium refund took place; going forward, AM Best expects capital requirements to return to its previous levels and capital to be stable without dividend payments in the medium term. Asset-liability management follows a very conservative investment policy focused on maintaining liquidity to cover its obligations in terms of tenure and currencies. Additionally, ERM is considered appropriate as it is completely supported by Sura’s expertise and management team.
As of December 2019, the company reported positive net profit for the first time since its inception. Nevertheless, operating performance still reflects a strong dependence on investment income to cover administrative expenses, for which AM Best remains attentive to macroeconomic conditions and their impact on investment results of the company. The captive nature of the company within the eighth largest insurance group in Latin America provides flexibility in terms of growth and premium risk to efficiently manage its capital and return positions in the future. AM Best therefore considers operating performance to be adequate for the current ratings.
Positive rating actions could take place in the medium term if Sura Re is able to achieve its targeted geographic premium distribution with good quality underwriting, coupled with a very strong balance sheet assessment. Negative rating actions could take place if the company’s financial performance falls to a level that affects capital, and therefore, its risk-adjusted capitalization, either through business decisions or deteriorating macroeconomic conditions.
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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