Best’s News & Research Service - May 27, 2021 04:55 PM (EDT)
AM Best Affirms Credit Ratings of Berkley International Fianzas Mexico S.A.
- May 27, 2021 04:55 PM (EDT)
Mexico City //BestWire// - AM Best has affirmed the Financial Strength Rating of A+ (Superior), the Long-Term Issuer Credit Rating of “aa-” (Superior) and the Mexico National Scale Rating of “aaa.MX” (Exceptional) of Berkley International Fianzas Mexico S.A. (BFM) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) is stable.
BFM is a member of W. R. Berkley Insurance Group (Berkley Group), which on a consolidated basis, has a balance sheet strength that AM Best assesses as strongest, as well as strong operating performance, a favorable business profile and appropriate enterprise risk management (ERM).
The ratings reflect BFM’s substantial reinsurance support from the Berkley Group through the Berkley Insurance Company. Additionally, these ratings factor in BFM’s integration with its parent company, W. R. Berkley Corporation (W. R. Berkley), in terms of underwriting, ERM and capital commitments. Limiting the ratings is the inherent risk of a startup company implementing its business plan, accentuated by the challenges derived from the weakening of the Mexico’s economy by the COVID-19 pandemic.
BFM was formed in November 2016, and is the Mexico surety subsidiary of W. R. Berkley. The company received regulatory approval for operations in June 2017 and issued its first policy that same month. The company plans to develop a regional presence in northwest Mexico, through a predominant mix of administrative surety and a lesser portion of credit and judicial products strongly backed by a comprehensive reinsurance contract with its parent company.
BFM’s solid risk-adjusted capitalization is derived from its strong capital position in support of its premium growth during its first years of operation, which is strengthened further by the comprehensive reinsurance contract with its parent company. Furthermore, AM Best recognizes W. R. Berkley’s commitment to its subsidiaries providing additional capital fungibility to the Mexico operation.
BFM has been able to grow it business volume during the last four years. Despite several challenges that the COVID-19 pandemic posed for Mexico’s surety segment in 2020, BFM was able to surpass its 2019 premium growth by focusing on private sector business. BFM’s experienced team of underwriters expect their underwriting capabilities to continue providing resources for the company to keep developing its business base.
If positive rating actions are taken on the main operating subsidiaries of the Berkley Group for improved balance sheet metrics, including improved financial leverage and improved loss reserve development trends for certain lines of business, BFM’s ratings likely would move in tandem. Conversely, if negative rating actions are taken on the Berkley Group, as a result of volatility in the equity markets that leads to a significant drop in equity and prevents the organization from maintaining the expected risk-adjusted capital levels, the ratings of BFM would mirror those same actions. Negative rating actions also could occur to the insurance operations as a result of a sustained deterioration in their underwriting or operating results, driven by either current accident year results or adverse development of loss reserves from prior years. If the financial position of the ultimate parent weakens, requiring the withdrawal of capital from the group’s various insurance companies or increases financial leverage or leads to a decline in interest coverage at the holding company that is not supportive of the current ratings level, negative rating actions could be taken on the Berkley Group, and BFM’s ratings would reflect those actions.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, 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:
- The Treatment of Terrorism Risk in the Rating Evaluation (Version Oct. 15, 2020)
- Evaluating Country Risk (Version Oct. 13, 2017)
- Understanding Universal BCAR (Version March 11, 2021)
- Catastrophe Analysis in A.M. Best Ratings (Version Oct. 13, 2017)
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- A.M. Best’s Ratings On a National Scale (Version Oct. 13, 2017)
- Scoring and Assessing Innovation (Version March 05, 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: May 19, 2020
- Date Range of Financial Data Used: Dec. 31, 2014-March 31, 2021
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.
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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.