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FOR IMMEDIATE RELEASE
LONDON - DECEMBER 09, 2016 12:08 PM (EST)
A.M. Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” to Nova Casiopea Re S.A. (NCRe) (Luxembourg). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect NCRe’s excellent projected risk-adjusted capitalisation, a risk management framework commensurate to its risk profile and the company’s experienced management team. An offsetting rating factor is the inherent earnings volatility embedded in the business to be written by the company.
NCRe is a captive reinsurer of Telefonica S.A. (Telefonica), a Spanish multinational broadband and telecommunications provider with operations in Europe, Asia, and North, Central and South America. Operating globally, it is one of the largest telephone operators and mobile network providers in the world. NCRe will start underwriting in 2017 and will derive its business solely from Telefonica’s global operations. Consequently, Telefonica’s future strategic transactions could have a material impact on premium volumes.
The captive’s risk-adjusted capitalisation is projected to be excellent, reflecting moderate underwriting leverage and a relatively low-risk investment profile. Due to the nature of business to be underwritten, claims experience is likely to be volatile. However, volatility will be partly mitigated by a comprehensive retrocession programme for catastrophe exposure placed with a panel of financially strong reinsurers. NCRe will underwrite approximately EUR 54 million of gross written premiums during 2017 as it replaces Telefonica’s other captive reinsurer, Casiopea Re S.A. (Casiopea Re), in the renewal of the conglomerate’s property and liability reinsurance contracts.
NCRe’s operations will be managed by the same personnel that have managed Casiopea Re’s activities for more than 10 years. In A.M. Best’s opinion, the proven track record of NCRe’s management team substantially reduces execution risk associated with the new captive. NCRe will implement a risk management framework commensurate to its risk profile and closely integrated with that of Telefonica.
A.M. 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 A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source.