A.M. Best has assigned the financial strength rating (FSR) of “A- (Excellent)” and issuer credit rating (ICR) OF “a-” to Commonwealth Annuity and Life Reinsurance Company (Commonwealth Re).
The ratings assigned to Commonwealth Re have been placed under review with negative implications by A.M. Best due to its subsidiary, Commonwealth Annuity and Life Insurance Company’s (Commonwealth) acquisition of Aviva USA.
“While the acquisition of Aviva USA is consistent with Commonwealth’s growth strategy, A.M. Best views the magnitude of this potential transaction as significant. As a result, there is uncertainty with respect to the impact on its balance sheet and financial metrics,” said the ratings firm in a recent statement.
Commonwealth Re’s ratings reflect its role as an offshore captive reinsurance company for Global Atlantic Financial Group’s (the ultimate owner of Commonwealth and Commonwealth Re) life insurance business.
It reinsures approximately 70 percent of Global Atlantic’s life insurance business mostly through assumed business from its affiliate, Commonwealth.
“Offsetting rating factors include Commonwealth Re’s large percentage of interest-sensitive and separate account liabilities, which may expose it to disintermediation risk and spread compression due to the continuing low interest rate environment.”
