A.M. Best has upgraded the financial strength rating from B+ (Good) to B++ (Good) and the long-term issuer credit rating from “bbb-” to “bbb” of BTG Pactual Resseguradora (BTG Re).
The outlook of the ratings of the Brazil-based reinsurer has been revised from negative to stable.
Banco BTG Pactual (BTG Pactual), BTG Re’s parent company, has provided capital support, as well as operational and risk management capabilities.
The company essentially acts as a captive reinsurer for its sister company, Pan Seguros, which is 51 percent owned by BTG Pactual.
The ratings are reflective of BTG Re’s balance sheet strength, categorised as “strongest”, in addition to its adequate operating performance, neutral business profile, and appropriate enterprise risk management.
They also reflect the impact of the parent company’s credit profile and the still challenging but improving reinsurance conditions in Brazil.
BTG Re maintains solid stand-alone attributes in terms of operating performance and risk-adjusted capitalisation.
Since its inception, BTG Re has produced overall earnings, driven by investment income and complemented by underwriting results.
The company also benefits from a solid retrocession programme that mitigates much of its underwriting exposures.
Brazil’s reinsurance market is very competitive with domestic and global reinsurers continuing to enter the market, and BTG Re has begun to develop its product offerings in both the Brazilian market and other Latin American territories.
A.M. Best says it will continue to “monitor BTG Re’s risk-adjusted capitalisation and the execution of its product and geographic expansion, in addition to the credit profile of its parent”.
Positive rating action in BTG Re’s could be caused by the continued improvement of BTG Pactual’s credit profile.
However, the deterioration of BTG Pactual’s credit profile or liquidity position, or a decline in either the risk-adjusted capitalisation or the operating performance of BTG Re could negatively impact the ratings.