Best’s News & Research Service - December 14, 2016 03:47 PM (EST)
A.M. Best Downgrades Credit Ratings of Istmo Compañía de Reaseguros, Inc.; Removes from Under Review with Negative Implications
- December 14, 2016 03:47 PM (EST)
Mexico City //BestWire// - A.M. Best has removed from under review with negative implications and downgraded the Financial Strength Rating to a Non-Rating Designation of E (Under Regulatory Supervision) from B (Fair) and the Long-Term Issuer Credit Rating to “e” from “bb+” of Istmo Compañía de Reaseguros, Inc. (Istmo Re) (Panama City, Panama).
The rating actions taken on Istmo Re reflect a regulatory intervention at the company on Dec. 12, 2016 by the Superintendent of Insurance and Reinsurance of Panama (SSRP). These actions were publicized through a press release issued by the SSRP, in which the regulator stated that Istmo Re failed to cover the minimum regulatory requirements for paid capital, presented an inferior ratio of net premium to net surplus to that required by regulation, relied on insufficient assets to integrally satisfy its liabilities and is incapable of continuing operations without compromising the interests of policyholders.
SSRP’s notice of intervention and findings came after its review of the company’s unaudited third quarter financial statements, and an on-site regulatory inspection at Istmo Re’s offices. Furthermore, Istmo Re had provided the regulators with an action plan dated Sept. 5, 2016, under which it would sell its assets and reduce its outstanding debt over a three-month period. However, as of Dec. 1, 2016, no actions had been implemented and therefore through memorandum DSES-M-352, the Director of Supervision of Insurance and Reinsurance Companies recommended the intervention at Istmo Re. This regulatory action is expected to last no less than 180 days.
A.M. Best will closely monitor the ratings of Istmo Re and its subsidiaries, Liffey Reinsurance Company Designation Activity Company (Liffey Re) (Dublin, Ireland) and Aseguradora del Istmo, S.A. (ADISAP) (Panama City, Panama), as this regulatory action develops. Derived from the aforementioned, no rating actions have been taken yet on the subsidiaries.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. 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:
- Catastrophe Analysis in A.M. Best Ratings (Version Nov. 3, 2011)
- Equity Credit for Hybrid Securities (Version April 2, 2014)
- Evaluating Country Risk (Version May 2, 2012)
- Rating Members of Insurance Groups (Version Dec. 15, 2014)
- Rating Run-Off Insurers and Specialists (Version March 25, 2013)
- Risk Management and the Rating Process for Insurance Companies (Version April 2, 2013)
- Understanding Universal BCAR (Version April 28, 2016)
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.”
- Previous Rating Date: Dec. 2, 2016.
- Date of Financial Data Used: Sept. 30, 2016.
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