Best’s News & Research Service - January 24, 2024 10:47 AM (EST)
AM Best Revises Outlooks to Positive, Affirms Credit Ratings of Ocean International Reinsurance Company Limited
- January 24, 2024 10:47 AM (EST)
Mexico City //BestWire// - AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Rating (Long Term ICR) of “a-” (Excellent) of Ocean International Reinsurance Company Limited (Ocean Re) (Barbados).
The Credit Ratings (ratings) reflect Ocean Re’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).
The positive outlooks recognize the disciplined underwriting by the company to deploy its capital with profitable results. Operating performance metrics continue showing a positive trend, in conjunction with growth targets based on diversified geographical exposures, potential new businesses and successful growth of the risk-bearing portfolio.
Ocean Re is a Barbados-based reinsurer, licensed as a Class 2 insurance company, which offers a diversified product mix worldwide with a relevant presence in Latin America. Ocean Re also offers facultative reinsurance programs, which are fully funded to the projected ultimate losses of the company’s clients. Ocean Re’s business development strategy clearly identifies an increase in the proportion of traditional reinsurance in its portfolio, as compared with its captive portfolio.
Ocean Re’s regional geographic footprint has continued to expand, having presence in 114 countries as of December 2022, being able to further diversify its risks insured throughout Latin America, Asia, the Middle East and North Africa, among other regions. To further improve its underwriting, the company has acquired some of its business partners’ operations (including personnel), gaining expertise and exclusivity over those channels, regions and markets.
Ocean Re’s risk-adjusted capitalization remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR) and has benefited from a capital contribution received in early 2020 and profitable results up to Sept. 30, 2023. In addition, the broader geographic diversification could reflect an improvement in the required capital over the medium term; however, AM Best will continue to monitor the influence of the holding company on Ocean Re’s balance sheet strength, due to its financial leverage and evolving corporate structure.
Ocean Re’s operating performance in 2022, and up to September 2023, resulted in positive net income, due to good levels of premium sufficiency derived from the performance of its expanding traditional reinsurance lines, as well as from the nature of its captive business. Up to September 2023, results had almost reached those of year-end 2022, pointing to a consolidation of the underwriting strategy in some markets, while others are still being developed, with appropriate ERM policies and procedures to mitigate any upcoming risk.
Positive rating actions could take place as a result of the successful evolution of Ocean Re’s diversification strategy, in line with the positive trend in operating performance metrics. Negative rating actions could occur from material changes to risk-adjusted capitalization either as a result of losses or implementation risk of the business strategy. Also, negative rating actions could occur if there is an increase in the financial leverage of the holding company putting pressure on the balance sheet strength of Ocean Re.
The methodology used in determining these ratings is Best’s Credit Rating Methodology (Version Jan. 18, 2024), 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 http://www.ambest.com/ratings/methodology .
Key insurance criteria reports utilized:
• Evaluating Country Risk (Version May 04, 2023)
• Understanding Global BCAR (Version July 06, 2023)
• Catastrophe Analysis in A.M. Best Ratings (Version Mar 10, 2023)
• Available Capital & Holding Company Analysis (Version Jan. 18, 2024)
• Scoring and Assessing Innovation (Version 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: Dec. 8, 2022
• Initial Rating Date: Jan. 27, 2014
• Date Range of Financial Data Used: Dec. 31, 2018-Sept. 30, 2023
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