AM Best Revises Outlooks to Positive; Affirms Credit Ratings of Sapphire Reinsurance Company

MEXICO CITY--(BUSINESS WIRE)--AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” (Good) of Sapphire Reinsurance Company (Sapphire) (Cayman Islands).

The Credit Ratings (ratings) reflect Sapphire’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The outlooks revised to positive from stable reflect Sapphire’s positive operating performance driven by ongoing underwriting discipline and operational efficiency. AM Best’s expects the favorable trend in operating performance to continues while maintaining the current assessment of balance sheet strength.

Sapphire was incorporated on September 6, 2005, and operates subject to the provisions of the Companies Act of the Cayman Islands. The company is a captive reinsurer related to a large privately owned conglomerate with operations across multiple business sectors in Latin America, including industrial, motor, textile, pipe manufacturing, public transport and waste management. It provides coverage through reinsurance and retrocession agreements with duly registered and approved reinsurers in jurisdiction where the underlying risk is located, such as Colombia, Chile and El Salvador.

At end-year 2024, the portfolio is highly concentrated with 86.2% of gross premiums written in Colombia, followed by 12.9% in Chile and 0.9% in El Salvador. Within the business mix, motorcycle insurance stands out, representing the bulk of the portfolio with 59.5% of net written premiums, followed by auto at 28.5%, life group at 7.6%, marine at 1.6%, material damage at 2.5% and machinery and equipment at 0.2%. Due to the concentration levels in the portfolio, as well as its limited commercial scope as a captive, AM Best assesses Sapphire's business profile as limited.

Sapphire’s balance sheet strength assessment of strongest is supported by its risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR). The assessment also factors in its stability and constantly growing capital base supported by the reinvesting of earnings and characterized by responsible asset-liability management and a low underwriting leverage, as well as a strong liquidity position.

The company continues to strengthen its operating performance, maintaining positive results driven by sound technical efficiency. Over the last five years, the combined ratio has consistently remained below 100%, averaging 44.5%, reflecting effective expense management and loss ratios that demonstrate discipline underwriting. While investment activity continues to support profit growth, Sapphire’s profitability is primarily driven by its solid operational performance. AM Best expects Sapphire to maintain premium sufficiency, supported by disciplined underwriting.

AM Best considers Sapphire’s ERM to be appropriate as it has defined policies and procedures, which are attached to its risk tolerance adopting a conservative approach that is continuously monitored.

Positive rating actions could occur if the company continues a consistent upward trend in its profitability metrics, while maintaining its strongest level of risk-adjusted capitalization as measured by BCAR. Conversely, negative rating actions could result if Sapphire experiences a deterioration in its risk-adjusted capitalization as a result of a weak operating performance or capital outflows. Negative rating actions could also occur if the credit profile of the ultimate parent company deteriorated to a point where it could potentially cause volatility in Sapphire’s capital base from significant capital withdrawals.

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.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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