MEXICO CITY--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A+ (Superior), the Long-Term Issuer Credit Rating of “aa-” (Superior) and the Mexico National Scale Rating of “aaa.MX” (Exceptional) of Berkley International Fianzas Mexico S.A. (BFM) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) is stable.
BFM is a member of W. R. Berkley Insurance Group (Berkley Group), which on a consolidated basis, has a balance sheet strength that AM Best assesses as strongest, as well as strong operating performance, a favorable business profile and appropriate enterprise risk management (ERM).
The ratings reflect BFM’s substantial reinsurance support from the Berkley Group through the Berkley Insurance Company. Additionally, these ratings factor in BFM’s integration with its parent company, W. R. Berkley Corporation (W. R. Berkley), in terms of underwriting, ERM and capital commitments. Limiting the ratings is the inherent risk of a startup company implementing its business plan, accentuated by the challenges derived from the weakening of the Mexico’s economy by the COVID-19 pandemic.
BFM was formed in November 2016, and is the Mexico surety subsidiary of W. R. Berkley. 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 by a comprehensive reinsurance contract with its parent company.
BFM’s solid risk-adjusted capitalization is derived from its strong capital position in support of its premium growth during its first years of operation, which is strengthened further by the comprehensive reinsurance contract with its parent company. Furthermore, AM Best recognizes W. R. Berkley’s commitment to its subsidiaries providing additional capital fungibility to the Mexico operation.
BFM has been able to grow it business volume during the last four years. Despite several challenges that the COVID-19 pandemic posed for Mexico’s surety segment in 2020, BFM was able to surpass its 2019 premium growth by focusing on private sector business. BFM’s experienced team of underwriters expect their underwriting capabilities to continue providing resources for the company to keep developing its business base.
If positive rating actions are taken on the main operating subsidiaries of the Berkley Group for improved balance sheet metrics, including improved financial leverage and improved loss reserve development trends for certain lines of business, BFM’s ratings likely would move in tandem. Conversely, if negative rating actions are taken on the Berkley Group, as a result of volatility in the equity markets that leads to a significant drop in equity and prevents the organization from maintaining the expected risk-adjusted capital levels, the ratings of BFM would mirror those same actions. Negative rating actions also could occur to the insurance operations as a result of a sustained deterioration in their underwriting or operating results, driven by either current accident year results or adverse development of loss reserves from prior years. If the financial position of the ultimate parent weakens, requiring the withdrawal of capital from the group’s various insurance companies or increases financial leverage or leads to a decline in interest coverage at the holding company that is not supportive of the current ratings level, negative rating actions could be taken on the Berkley Group, and BFM’s ratings would reflect those actions.
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