OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Rating to “a-” from “a” of IRB-Brasil Resseguros S.A. (IRB) (Brazil). Concurrently, AM Best has maintained the under review with negative implications status on these Credit Ratings (ratings).
The ratings reflect IRB’s balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, neutral business profile and marginal enterprise risk management (ERM).
The rating downgrades reflect a revision of AM Best’s view of IRB’s ERM, following the company’s failure to establish adequate risk management tools to ensure meeting appropriate regulatory liquidity metrics calculated by the Superintendência de Seguros Privados (SUSEP), the Brazilian (re)insurance industry regulatory authority, which ultimately resulted in a special regulatory inspection. AM Best believes that IRB should have resources and management capabilities to avoid such a regulatory breach.
In addition, in March 2020, IRB announced the sudden departure of its senior management due to governance issues, and in April 2020, there were significant changes in the board of directors. The recent, high-level departures have created additional uncertainty regarding the strategic direction of the company.
The under review with negative implications status reflects AM Best’s ongoing concerns about the effectiveness of IRB’s governance and risk management. Additionally, any potential negative finding relating to the special regulatory inspection or IRB’s own internal investigation could impact AM Best’s view of IRB’s balance sheet strength, operating performance or business profile.
A factor that could cause negative rating actions is a deterioration in the group’s balance sheet strength, operating performance, business profile, or ERM caused by any management change or subsequent events at the company.
A rating factor that could lead to a stable outlook is the successful management transition while maintaining the company’s existing levels of risk-adjusted capitalization and operating performance, as well as mitigating any potential impact on the company’s business profile.
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