Best’s News & Research Service - June 22, 2023 02:12 PM (EDT)
AM Best Affirms Credit Ratings of Scotia Reinsurance Limited
- June 22, 2023 02:12 PM (EDT)
Oldwick //BestWire// - AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” (Excellent) of Scotia Reinsurance Limited (Scotia Re) (Barbados). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Scotia 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. The ratings also reflect implicit support from the greater organization.
Scotia Re is primarily a life reinsurance subsidiary that assumes non-Canadian business, largely from Mexico, South and Central America, and the Caribbean, sourced through retail operations of the company’s ultimate parent, The Bank of Nova Scotia (Scotiabank). The initial book of business was assumed in 2017 from Scotia Insurance (Barbados) Limited (SIB), which has a long history of favorable underwriting results. The assumed business produced favorable return metrics under Scotia Re after its fifth full year in operation. The company’s balance sheet strength is bolstered further by the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), reflecting in part a conservative short duration and highly liquid investment portfolio. AM Best notes the company manages capital to specific targets and has kept absolute capitalization levels largely flat, and Scotia Re could recapitalize in a stress scenario by adjusting its shareholder dividend payout.
The ratings reflect one notch of rating enhancement from the company’s sister entity, SIB, based on the transfer of the original block of business in 2017. Scotia Re has the implicit support of Scotiabank, the ultimate parent of both Scotia Re and SIB. Scotiabank can provide financial resources to Scotia Re if ever required.
These strengths are offset partially by Scotia Re’s dependence for growth on lending product originations in economies outside of Canada, many of which are deemed to have higher country risk profiles.
Creditor insurance premium growth from international business remains dependent on the global economy. Going forward, in addition to growing creditor insurance cross-sales on loans through face-to-face interactions between bank customers and agents, Scotiabank is also focusing on growing the digital distribution of products, and the impact of such sales initiatives on Scotia Re’s revenue and operating income will continue to be monitored by AM Best.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all 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. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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.