AM Best

SEPTEMBER 15, 2022 03:52 PM (EDT)

AM Best Revises Outlooks to Positive for Compañía Reaseguradora del Ecuador S.A.; Affirms Credit Ratings

 Elí Sánchez
Associate Director
+52 55 1102 2720, ext. 122

Alfonso Novelo
Senior Director, Analytics
+52 55 1102 2720, ext. 107
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jeff Mango
Managing Director, Strategy & Communications
+1 908 439 2200, ext. 5204


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 Compañía Reaseguradora del Ecuador S.A. (Ecua Re) (Ecuador).

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

The positive outlooks result from the strengthening of the company’s capital position, backed by the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR).

Ecua Re was established in 1977 and is the only domestic reinsurer operating in Ecuador. The company provides reinsurance solutions for the country’s domestic insurers. The company’s business portfolio is composed mostly of property risks, mainly fire and auto, with a small component of casualty and life risks. Ecua Re has also started an internationalization process that will lead to foreign reinsurer status in selected markets. The company likely will benefit from recent regulatory changes in Ecuador allowing primary insurers to cede personal lines business, which was previously restricted.

The company’s largest shareholder is Hannover Re, which has a 30% ownership stake via its wholly owned subsidiary, FUNIS GmbH & Co. KG; other local leading insurers hold approximately a 40% stake in the company. Ecuador’s economic prospects have improved in 2021 and 2022 due to a favorable market perception of the new government; however, this view did not reflect in the insurance industry in 2021. For 2022, AM Best will continue to assess the impact of economic developments in Ecuador’s insurance market, as well as new market dynamics that result from new businesses opening. Partially mitigating AM Best’s concern over Ecuador’s economic environment is that Ecua Re’s business profile benefits from its ownership, which provides access to quality business while at the same time maintaining reinsurance capacity through its main shareholder.

Ecua Re’s balance sheet strength is considered very strong, as risk-adjusted capitalization reflects the company’s ability to manage its risk exposures, supported by a comprehensive reinsurance program led by Hannover Re. Furthermore, the company gains financial flexibility through an Ecuador law that requires shareholders with a stake higher than 12% to assume additional financial responsibility in the event of insufficient shareholders’ funds. Ecua Re’s capital volume has continued to strengthen despite substantial amount of dividends paid in relation to net income, reflecting the capacity of the company to generate net results. ERM practices are considered appropriate, given the company’s comprehensive and appropriate risk framework.

AM Best views the company’s operating performance as strong, given its consistent positive technical performance during the past five years. Additionally, its retrocession profile provides revenue from ceding commissions and mitigates claim costs, as experienced in the 2016 earthquake. As of July 2022, the company posted a combined ratio of 80%.

Positive rating actions could take place if the company can increase its capital base in a stable manner while achieving the strongest level of risk-adjusted capitalization, as measured by BCAR. Negative rating actions could take place if the company’s operating performance deteriorates to levels no longer supportive of the strong assessment either through market developments or changes in underwriting.

The methodology used in determining these ratings is Best’s Credit Rating Methodology (Version Nov. 13, 2020), 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

Key insurance criteria reports utilized:

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

  • Understanding Global BCAR (Version June 30, 2022)

  • Catastrophe Analysis in AM Best Ratings (Version Oct. 13, 2017)

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

  • Scoring and Assessing Innovation (Version March 5, 2020)

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 Guide to Best’s Credit Ratings.

  • Previous Rating Date: Oct. 22, 2021.

  • Date Range of Financial Data Used: Dec. 31, 2016–July 31, 2022

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.

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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
077239 Compania Reaseguradora del Ecuador SA