Press Release - MARCH 06, 2019

AM Best Affirms Credit Ratings of Berkley International Fianzas Mexico S.A.


CONTACTS:
 Olga Rubo
Associate Financial Analyst
+52 55 1102 2720, ext. 134
olga.rubo@ambest.com

Alfonso Novelo
Senior Director, Analytics
+52 55 1102 2720, ext. 107
alfonso.novelo@ambest.com
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

MEXICO CITY - MARCH 06, 2019
AM Best has affirmed the Financial Strength Rating of A+ (Superior), the Long-Term Issuer Credit Rating of “aa-” and the Mexico National Scale Rating of “aaa.MX” 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 Group (Berkley group), which on a consolidated basis, has a balance sheet strength that AM Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

The ratings reflect BFM’s affiliation with its parent company, W. R. Berkley Corporation (W. R. Berkley), in terms of underwriting, reinsurance protection, ERM and capital commitments. Limiting the ratings is the inherent risk of a startup company implementing its business plan and the potential volatility of Mexico’s economy during 2019.

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 up 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.

As a company of new formation, BFM will have to produce sufficient volume to compensate for its fixed costs, while posting adequate underwriting performance on its retained premium. While the BFM management and underwriting team have a successful track record of their own, the business plan implementation has to evolve for AM Best to adequately evaluate the company’s operating performance.

Although the company has an experienced team of underwriters, to reach an adequate premium volume might prove more challenging than expected, as the expectation of a more dynamic surety market is subject to uncertainty with regard to the new government’s spending infrastructure, which could impact the growth of the surety sector during the following years and potentially limit the company’s growth prospects.

If there are positive rating actions taken on the main operating subsidiaries of the Berkley group as a result of a substantial and sustained improvement in its operating performance metrics relative to its peers, BFM’s ratings likely would move in tandem. Likewise, if there are negative rating actions taken on the Berkley group as a result of a sustained deterioration in the group’s underwriting or operating results, driven by either current accident-year results or adverse development of prior years’ loss reserves, or as a result of a change in the financial position of the group’s holding company that results in the withdrawal of capital from the group or which causes an increase in financial leverage and/or decline in interest coverage at the holding company that is not supportive of the current ratings, BFM’s ratings would mirror those same actions.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of AM Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology .

Key insurance criteria reports utilized:


  • Evaluating Country Risk (Version Oct. 13, 2017)

  • Understanding Universal BCAR (Version May 14, 2018)

  • Available Capital & Holding Company Analysis (Version Oct. 13, 2017)

  • Rating New Company Formations (Version Oct. 13, 2017)

  • Rating Surety Companies (Version Oct. 13, 2017)

  • AM Best’s Ratings On a National Scale (Version Oct. 13, 2017)

View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, please refer to Understanding Best’s Credit Ratings.


  • Previous Rating Date: Feb. 27, 2018

  • Date of Financial Data Used: Dec. 31, 2018

This press release relates to rating(s) that have been published on AM Best’s website. For additional 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.

AM Best does not validate or certify the information provided by the client in order to issue a credit rating.

While the information obtained from the material source(s) is believed to be reliable, its accuracy is not guaranteed. AM Best does not audit the company’s financial records or statements, or otherwise independently verify the accuracy and reliability of the information; therefore, AM Best cannot attest as to the accuracy of the information provided.

AM Best’s credit ratings are independent and objective opinions, not statements of fact. AM Best is not an Investment Advisor, does not offer investment advice of any kind, nor does the company or its Ratings Analysts offer any form of structuring or financial advice. AM Best’s credit opinions are not recommendations to buy, sell or hold securities, or to make any other investment decisions. View our entire notice for complete details.

AM Best receives compensation for interactive rating services provided to organizations that it rates. AM Best may also receive compensation from rated entities for non-rating related services or products offered by AM Best. AM Best does not offer consulting or advisory services. For more information regarding AM Best’s rating process, including handling of confidential (non-public) information, independence, and avoidance of conflicts of interest, please read the AM Best Code of Conduct. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

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