Best’s News & Research Service - November 29, 2017 02:51 PM (EST)
A.M. Best Assigns Credit Ratings to Energy Risk Indemnity Reinsurance Inc.
- November 29, 2017 02:51 PM (EST)
Mexico City //BestWire// - A.M. Best has assigned a Financial Strength Rating of B+ (Good), and a Long-Term Issuer Credit Rating of “bbb-” to Energy Risk Indemnity Reinsurance Inc. (ERI Re) (Barbados). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings of ERI Re reflect its strong capital base for the purpose of developing a diversified property/casualty book of business throughout Latin America. Limiting the ratings is the inherent uncertainty of a startup company regarding the implementation of its business plan, imminent concentration of its business portfolio in early stages of operation and its final reinsurance structure in order to protect its balance sheet.
ERI Re is a Barbados-based startup reinsurer, originally established in 2013 as a segregated cell company (SCC) focused in energy risks. From 2013-2015, the company successfully conducted business as an SCC; however, management in 2016 decided to change its license to a qualifying insurance company to further diversify its book of business and to underwrite a broader range of risks in the Latin American property/casualty market.
Considering the premium growth targets of the company, A.M. Best’s view on capital adequacy is strong and has benefited from reserves releases in 2016 and 2017 that have improved its reported surplus, which is primarily composed from retained earnings rendering strong risk adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR).
The business plan of the company is well-structured, but is dependent on reinsurance, a key factor considering the expositions the company wants to take geographically in Latin America. The property/casualty lines the company is targeting, such as bonds, property, oil and mining, require strong reinsurance protection. ERI Re is currently structuring its reinsurance program and it will remain a key factor for future rating assessments.
While the company is targeting reasonable premium volumes, due to the startup nature of the company, execution risk limits the ratings; nevertheless, the company has a strong management and underwriting team to execute its business plan and to develop the company’s risk capabilities as its business grows.
Positive rating actions could take place if the company is able to achieve its goals in terms of premium volume and profitability while maintaining a strong risk-adjusted capitalization. Negative rating actions could take place if the company fails to meet its financial performance to a level that impacts its capital and therefore its risk-adjusted capitalization.
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:
- Evaluating Country Risk (Version Oct. 13, 2017)
- Understanding Universal BCAR (Version Oct. 13, 2017)
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- Rating New Company Formations (Version Oct. 13, 2017)
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: Not Rated.
- Date of Financial Data Used: June 30, 2017.
This press release relates to rating(s) that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page.
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