Best’s News & Research Service - November 09, 2023 04:15 PM (EST)
AM Best Affirms Credit Ratings of IRB-Brasil Resseguros S.A.
- November 09, 2023 04:15 PM (EST)
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 IRB-Brasil Resseguros S.A. (IRB) (Rio de Janeiro, Brazil). The outlook of these Credit Ratings (ratings) is negative.
The ratings reflect IRB’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
AM Best’s concerns with the company’s capital adequacy have been mitigated to some degree following the completion of its capitalization offer and improvement in its risk-adjusted capitalization levels, as measured by Best’s Capital Adequacy Ratio (BCAR). The negative outlooks reflect that while IRB has improved its operating performance, a material interruption or deviation on such trend most likely will lead to a rating downgrade.
IRB maintains a balance sheet strength level that fits in AM Best’s strongest assessment range. Surplus has grown over the past five to six years and BCAR scores are in the top category for a company at this rating level. The balance sheet also benefits from protection via a retrocession program with highly rated reinsurers that limits IRB’s net exposures to manageable levels.
AM Best assesses IRB’s operating performance as adequate due to the changes in its results. Throughout 2023, the company has improved its operating performance through refining its portfolio cleanup, which aided in the recovery from its performance in prior years.
IRB is the dominant insurance market participant in Brazil. As of December 2022, IRB had almost 40% share of Brazil’s domestic reinsurance market. IRB ranked into the mid-range of AM Best’s most recent Global Reinsurance Top 50 ranking for 2023 at No. 38.
AM Best acknowledges that IRB has taken many steps to reinforce its ERM and governance structure, and these improvements helped stabilize its operations. AM Best recognizes that the changes are starting to show a trend of improvement in the company’s underwriting performance.
A factor that could lead to negative rating action are Brazil’s macroeconomic conditions, which could contribute further to a deterioration of IRB’s operating performance and become an obstacle to its ability to raise capital if needed. Positive rating actions could take place if the company continues to show improvements in its operating performance by implementing its transformation strategy.
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:
- Evaluating Country Risk (May 4, 2023)
- Understanding Global BCAR (July 6, 2023)
- Catastrophe Analysis in A.M. Best Ratings (March 10, 2023)
- Available Capital & Holding Company Analysis (Oct. 13, 2017)
- Scoring and Assessing Innovation (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: Oct. 7, 2022
- Initial Rating Date: Dec. 13, 2011
- Date Range of Financial Data Used: Dec. 31, 2018-July 30, 2023
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