Moody’s Investors Service has downgraded the insurance financial strength rating of Monticello Insurance, a Brazil-based captive reinsurance subsidiary, to “Ba1” from “Baa3”, with a negative outlook.
The rating of Monticello follows the downgrade of the captive’s parent company, mining company Vale. The rating reflects the downgrade of Vale’s rating to “Baa3” from “Baa2”, also with a negative outlook.
Monticello’s rating benefits from support provided by Vale, reflecting its close integration with the global risk management function of the group, according to Moody’s.
The downgrade of Vale has resulted in a lowered credit profile and weakened level of support for Monticello, which resulted in to the captive’s downgrade.
The captive is a core part of Vale’s risk management programmes and is the sole insurance captive utilised in Vale’s property insurance and business interruption programme worldwide.
Moody’s expects Monticello to continue to receive extensive parental support from Vale.
Given the negative outlook of Monticello’s rating, an upgrade is unlikely, according to Moody’s, but a return to stable outlook for Vale’s rating could lead to a restoration of a stable outlook.
