Press Release - MAY 10, 2019
AM Best Affirms Credit Ratings of Berkley International Seguros Mexico S.A.
FOR IMMEDIATE RELEASE
MEXICO CITY - MAY 10, 2019
BSM is a member of W. R. Berkley Insurance Group (Berkley Group), which on a consolidated basis, has a balance sheet strength that AM Best categorizes as strongest, as well as strong operating performance, a favorable business profile and appropriate enterprise risk management (ERM).
The ratings reflect BSM’s substantial reinsurance support from its group through the Berkley Insurance Company. Additionally, the ratings factor in BSM’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 and the potential for volatility in Mexico’s economy during 2019.
BSM was formed in November 2016, and is the Mexico subsidiary of W. R. Berkley; the company received regulatory approval for operations in June 2017 and issued its first premium in July of that year. The company offers a diversified slate of property/casualty products strongly backed up by treaty and facultative reinsurance contracts with its parent company.
BSM’s solid risk-adjusted capitalization is derived from its strong capital position, in support of its premium growth during its initial years of operation. This was further strengthened by the 95/5 percent quota share and excess of loss contracts provided by its parent. Furthermore, AM Best recognizes W. R. Berkley’s commitment to its subsidiaries through additional capital fungibility to the Mexico operation.
As a recently formed company, BMS will have to produce sufficient volume to compensate for its fixed costs, while posting adequate underwriting performance on its retained premium. While BSM’s management and underwriting team have a successful track record, the business plan implementation has to evolve for AM Best to evaluate the company’s operating performance adequately.
The Mexico property/casualty insurance sector experienced a decline during 2018, and further hurdles may arise due to changes in the economic environment as a result of the new government, which could cause potential volatility in 2019, and hamper the company’s growth prospects.
If positive rating actions are taken on the main operating subsidiaries of the Berkley Group for substantial and sustained improvement in its operating performance metrics relative to their peers, BSM’s ratings likely would move in tandem. Conversely, if negative rating actions are taken on the Berkley Group, as a result of a sustained deterioration in the group’s underwriting or operating results, the ratings of BSM would mirror those same actions. Negative rating action also could be driven by accident year results or adverse development of prior years’ loss reserves at the parent level, or result from a change in the financial position of the group’s holding company that prompts the withdrawal of capital from the group or causes an increase in financial leverage or decline in interest coverage at the holding company that is not supportive of the current ratings.
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:
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.
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.
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