Brazilian insurers J.Malucelli Re and J.Malucelli Seg have had their financial strength ratings of A- (Excellent) and long term issuer credit ratings of “a-” affirmed by AM Best.
The outlook of the ratings of the two insurers, collectively referred to as J.Malucelli, is stable.
J.Malucelli’s ratings reflect its balance sheet strength, categorised as strongest, in addition to its adequate operating performance, neutral business profile and appropriate enterprise risk management.
J.Malucelli Re, classified as a local reinsurer in Brazil, primarily operates as a captive reinsurer for J.Malucelli Seg, the market facing entity and a leading surety writer which has been operating for over 20 years.
J.Malucelli benefits operationally from its minority shareholder, The Travelers Companies (ownership is 49.5 percent), and maintains low underwriting leverage and strong liquidity metrics, with a comprehensive retrocession programme which provides additional capacity and reduces the overall exposure.
Offsetting the ratings slightly is J.Malucelli’s concentration risk as essentially a mono-line surety writer with business concentration in a single country.
The insurers’ future plans to mitigate this risk include expansion into related lines of business and geographic diversification into other regions of Latin America.
Surety remains one of the fastest-growing segments in Brazil’s reinsurance market, which continues to be highly competitive, with home-grown and global reinsurers vying for market share.
Additionally, while Brazil’s economy is showing initial signs that the economic recession is ending, companies are pursuing international expansion while keeping an eye on growth opportunities in the domestic insurance market.
The successful long term execution of J.Malucelli’s growth and diversification plan, as well as its consistent operating performance while maintaining its robust risk-adjusted capitalisation, could lead to positive rating action.
Negative rating movement could occur if there was a deterioration in operating results or risk-adjusted capitalisation, an inability to execute the growth and diversification strategy, a continued weakness in Brazil’s economy or a downgrade in Brazil’s country risk tier.