A.M. Best has affirmed the financial strength rating of A- (Excellent) and long-term issuer credit rating of “a-” of Nova Casiopea Re (NCRe).
The ratings reflect NCRe’s balance sheet strength, which A.M. Best categorises as “very strong”, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
NCRe, which was formed in 2017, replacing Casiopea Re (CRe) as Telefonica’s main reinsurance captive, is a pure captive reinsurer of Telefonica, a Spanish multinational broadband and telecommunications provider with operations in Europe, and North, Central and South America.
According to A.M. Best, NCRe’s balance sheet strength is underpinned by the strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio.
The rating firm explained that the balance sheet strength assessment is supported by NCRe’s conservative and appropriate liquid investment portfolio, as well as capital buffers in the form of equalisation reserves.
A partially offsetting rating factor, A.M. Best said, is the level of natural catastrophe risk the company is exposed to, which has the potential to introduce balance sheet volatility.
The recent announcement of Telefonica’s new business model will not impact the captive’s performance immediately. However, A.M. Best noted that a potential spin-off on the Latin America business will likely impact the captive’s risk exposure.
