A.M. Best has affirmed the financial strength rating of B++ (Good) and the long-term issuer credit rating of “bbb” of Sura Re, the Bermuda-based captive reinsurer of Suramericana (Sura).
The outlook of these ratings remains stable.
Sura Re is the wholly owned startup captive reinsurer of Sura, which is 81.13 percent owned by Grupo de Inversiones Suramericana.
The main purpose of the captive, which was formed in Bermuda as a class 3A insurer in December 2016, is to participate in property business underwritten by Sura’s affiliates across Latin America.
The strategic role that Sura Re aims to achieve in Sura’s overall regional strategy is recognised in the ratings, however, the captive’s business profile is considered limited due to its accessibility to market in comparison to other commercial insurers.
The ratings are reflective of Sura Re’s “very strong” balance sheet strength, adequate operating performance, limited business profile, and appropriate enterprise risk management (ERM).
According to the ratings agency, the balance sheet strength is a result of the risk-adjusted capitalisation being more than adequate for the risks it holds.
The captive’s capital base was further strengthened by a capital contribution of $10 million during 2018, however, no dividend payments are expected in the medium term.
Asset-liability management follows a highly conservative investment policy focused on maintaining liquidity to cover its obligations in terms of tenure and currencies, while ERM is considered appropriate as it is supported completely by Sura’s expertise and management team.
A.M. Best considers operating performance to be adequate for the current ratings.
As of December 2018, operating performance still reflects a strong dependence on investment income to cover administrative expenses.
A.M. Best noted that as the strategy of the company continues to evolve, it expects technical income to be able to cover these expenses and produce positive net income.
The captive nature of Sura Re guarantees it a portion of well-underwritten risks by affiliated companies, in comparison to other startups and commercial reinsurers.
If Sura Re is able to achieve its targeted geographic premium distribution with good quality underwriting coupled with a very strong balance sheet assessment, positive rating actions could take place in the medium term.
Negative rating actions could occur if the captive’s financial performance fails to a level that affects capital and therefore its risk-adjusted capitalisation.
