AM Best

AM Best Affirms Credit Ratings of RoyalStar Assurance Ltd.


John McGlynn
Senior Financial Analyst
+1 908 882 2106

Doniella Pliss
+1 908 882 2245

Christopher Sharkey
Associate Director, Public Relations
+1 908 882 2310

Al Slavin
Senior Public Relations Specialist
+1 908 882 2318


OLDWICK - AUGUST 30, 2023 11:34 AM (EDT)
AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of RoyalStar Assurance Ltd. (RSA) (Nassau, Bahamas). The outlook of these Credit Ratings (ratings) is stable.

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

RSA’s balance sheet strength assessment continues to be supported by its strongest risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), strategically conservative investment portfolio and comprehensive reinsurance program. These strengths are offset partially by RSA’s exposure to weather-related catastrophic events, given its geographic concentration of business and investments in the Caribbean, and its high reliance on reinsurance to protect surplus from catastrophic events.

RSA’s strong operating performance continued in 2022 with improved profitability and operating metrics versus 2021. RSA’s operating performance has benefited from a lack of catastrophic events since Dorian in 2019. Favorable reinsurance terms also contributed materially as investment and commission incomes derived from business ceded to reinsurers has become a significant portion of revenue. Profitability may be pressured over the near term as reinsurance capacity is limited across the Caribbean and insurers, including RSA, are incurring higher costs and lower commissions. However, it is likely that RSA will continue to maintain its relative performance, as opposed to its Caribbean peers, as all companies in the region are encountering the same challenges. Nevertheless, RSA and other Bahamas-domiciled insurance companies remain at risk of losing additional reinsurance capacity if the country cannot remove itself from the European Union and German lists of non-cooperative jurisdictions for tax purposes.

AM Best views RSA’s business profile as limited. The company provides personal and commercial lines coverages throughout the Bahamas, the Cayman Islands, the Turks and Caicos Islands, the U.S. Virgin Islands, the British Virgin Islands and Anguilla. Like many property/casualty insurers operating in the Caribbean, RSA cedes a significant portion of its written premiums to reinsurers under its reinsurance treaties. In addition, earnings remain subject to highly competitive, mature regional markets with limited potential for organic growth. RSA’s plans to actively expand its offerings outside the Bahamas have been on hold due to a lack of reinsurance capacity for new business.

AM Best continues to assess RSA’s ERM program as appropriate given its business risks. Reinsurance terms will be less favorable prospectively, but RSA’s program remains comprehensive. For 2023, RSA was able to secure sufficient reinsurance coverage despite reduced capacity in the region. The company has established processes in place to mitigate key identified risks and senior management is very active in risk taking decisions.

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.

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AMB# Company Name
087888 RoyalStar Assurance Ltd.