Fitch Ratings has affirmed Monticello Insurance Limited's (MIL) insurer financial strength (IFS) rating of 'BBB'.
The rating outlook is stable.
Fitch considers MIL to be core captive of Vale S.A, a Brazilian-headquartered mining company, which has been assigned an IFS of ‘BBB’/Stable. The captive generally receives an IFS equal to its parent.
MIL's rating is driven by expected support from its ultimate parent Vale S.A. MIL is wholly owned by Vale Holdings B.V., which in turn is 100% owned by Vale S.A.
Assessing the financial commitment of its parent, Fifth says: “Vale has made a reasonable financial support to MIL. It supports its continued solvency and viability through revolving loan agreements and issues letters of credit to fronting insurers and provides timely capital injections when needed.”
MIL had profits of US$48.7 million in the last year. “Despite the good performance in 2022, MIL's result is volatile and may suffer large variations depending on the assessment of its provisions. This may result in a significant deterioration in the loss ratio,” according to the ratings company.
Fitch notes: “The insurer is protected from large losses through reinsurance contracts. The large contracts are well diversified across an adequate number of mostly 'A-' rated reinsurers or above.”
