AM Best Information Services

OCTOBER 14, 2021 09:03 AM (EDT)

AM Best Revises Issuer Credit Rating Outlook to Negative for Kot Insurance Company AG

 Algirdas Karvelis
Financial Analyst
+44 20 7397 0285

Tim Prince
Director, Analytics
+44 20 7397 0320

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jim Peavy
Director, Communications
+1 908 439 2200, ext. 5644


LONDON - OCTOBER 14, 2021 09:03 AM (EDT)
AM Best has revised the Long-Term Issuer Credit Rating (Long-Term ICR) outlook to negative from stable and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb+” (Good) of Kot Insurance Company AG (Kot) (Switzerland). The outlook of the FSR is stable.

The Credit Ratings (ratings) reflect Kot’s balance sheet strength, which AM Best assesses as very strong, its strong operating performance, neutral business profile and appropriate enterprise risk management, as well as rating drag due to its association with Petroleos Mexicanos (PEMEX).

Kot is the captive reinsurer of PEMEX, the Mexican state-owned oil and gas company.

The revision of the Long-Term ICR outlook to negative from stable reflects a weakening in PEMEX’s credit profile due to ongoing negative free cash flow, high debt maturities and the resultant liquidity strain. Kot remains well-integrated within PEMEX and is important to the group as a cost-effective risk management tool. However, as PEMEX’s single reinsurance captive, Kot’s underwritten risks are concentrated in Mexico.

Kot’s very strong balance sheet is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects Kot to maintain a buffer over the minimum requirements for the strongest BCAR assessment in the medium term, supported by its relatively low net underwriting leverage and conservative investment strategy. An offsetting rating factor in the balance sheet strength assessment is Kot’s dependence on reinsurance to write large risks; however, the risks associated with this dependence are mitigated partly by long-standing relationships with reinsurers of good credit quality.

Kot’s robust historical earnings have been driven by its underwriting account. The combined ratio remained excellent at 34% in 2020 (2019: 20%), above the five-year weighted average of 31% (2016-2020). Kot’s five-year weighted average return on equity is 24%. AM Best expects the captive’s operating performance to remain supportive of a strong assessment, although prospective results are exposed to some degree of volatility stemming from low frequency, high severity losses.

AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit

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 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 specialising 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.

Related Companies

For information about each company, including the Best's Credit Reports, group members (where applicable) and news stories, click on the company name. An additional purchase may be required.

AMB# Company Name
090728 Kot Insurance Company AG
031363 Petroleos Mexicanos