Best’s News & Research Service - September 20, 2023 01:34 PM (EDT)
AM Best Affirms Credit Ratings of Maxseguros EPM Ltd.
- September 20, 2023 01:34 PM (EDT)
Mexico City //BestWire// - AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Maxseguros EPM Ltd. (Maxseguros) (Bermuda). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Maxseguros’ balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The ratings also reflect Maxseguros’ risk-adjusted capitalization being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), and supported by a comprehensive and adequate reinsurance program, coupled with a conservative investment policy and limited premium risk exposure. The ratings recognize the important role of the company within its corporate parent structure, Empresas Públicas de Medellín E.S.P. (EPM), which is owned by the Colombian municipality of Medellín. EPM is the largest power generation and multiutility company in Colombia. Maxseguros is a single-parent captive insurer wholly owned by EPM and provides reinsurance to the EPM group, covering property damage and business interruption, commercial crime, cyber risk, directors and officers, errors and omissions and general liability exposures.
These positive rating factors are offset partially by EPM’s substantial financial leverage and Maxseguros’ limited business and market scope, which is mitigated somewhat by the company’s stable results, favorable geographic spread of risk and the history of Maxseguros’ growing surplus position. Additionally, while Maxseguros depends on reinsurance, the company’s well-set underwriting and technical capabilities have allowed it to position itself as a key participant within EPM’s reinsurance panel.
The stable outlooks reflect Maxseguros’ role within EPM’s strategy, which results in financial flexibility for its balance sheet strength, as well as operating synergies that support profitable growth. This has been proven by Maxseguros’ capacity to increase its retentions while maintaining consistent operating performance without any adverse effect on its capitalization. AM Best has a favorable view of Maxseguros’ overall profile within the ultimate parent’s structure; however, EPM’s credit profile and financial leverage remain key factors for future reviews of Maxseguros.
Positive rating actions could take place if Maxseguros’ operating performance reflects a stable, upward trend of profitable underwriting and investment results that improve its metrics to compare favorably with a strong assessment level. Negative rating actions could occur if Maxseguros’ operating performance deteriorates due to increased retentions, to a point that it is no longer supportive of the ratings, and consequently, causes erosion in the company’s capital base. Negative rating actions could also arise if there is a material shift in the risk profile or role within EPM that undermines the stability and profitability of the company, including increased activity in cash outflows to the parent company.
AM 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.
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 www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- Alternative Risk Transfer (ART) (Version Oct. 13, 2017)
- Evaluating Country Risk (Version May 4, 2023)
- Understanding Global BCAR (Version July 6, 2023)
- Catastrophe Analysis in AM Best Ratings (Version March 10, 2023)
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- Scoring and Assessing Innovation (Version Feb. 27, 2023)
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, relevant sources of information and the frequency for updating ratings, please refer to Guide to Best’s Credit Ratings.
- Previous Rating Date: Sept. 8, 2022
- Initial Rating Date: Oct. 3, 2016
- Date Range of Financial Data Used: Dec. 31, 2018-June 30, 2023
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