A.M. Best has upgraded the financial strength rating to A (Excellent) from A- (Excellent) and the long-term issuer credit rating to “a” from “a-” of Lion Reinsurance Company Limited (Lion Re), which is based in Bermuda. The outlook of these credit ratings remains stable.
Lion Re is a subsidiary of ASSA Compañía Tenedora S.A. (ASSA Tenedora) and is owned ultimately by Grupo ASSA, S.A. (Grupo ASSA), a financial services holding company publicly traded on the Panama Stock Exchange.
A.M. Best stated that these ratings reflect Lion Re’s balance sheet strength which is categorised as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The rating firm highlighted that these ratings also reflect Lion Re’s continued “adequate operating performance” resulting from its “affiliated insurance companies in the region and from new strategic business alliances, strong risk-adjusted capitalisation”, which is measured by Best’s Capital Adequacy Ratio (BCAR), and its affiliation to Grupo ASSA, which provides synergies, operating efficiencies and guarantee support.
Lion Re is a Bermuda-based reinsurer assuming risks from ASSA Tenedora and affiliates for property, liability, marine, life, health and miscellaneous businesses. The company provides reinsurance as part of the group’s retrocession cover with a geographical exposure to Central America’s insurance market.
A.M. Best explained: “The company continues to support ASSA Tenedora’s strategy while producing positive bottom-line results amid healthy prospects for growth.”
Additionally, it expects Lion Re to continue playing an important role in ASSA Tenedora’s strategy, as it consolidates operations in new regions by providing reinsurance capacity while maintaining its capital base expansion.
Lion Re consistently reviews its underwriting guidelines to improve the performance of business segments that are deviating from targets. Investment income, based upon a more conservative strategy, continues to support Lion Re’s results; however, the company is not dependent on this revenue to achieve positive bottom-line results, according to the rating company.
A.M Best outlined that factors that could lead to an upgrade of the ratings or positive outlooks for Lion Re included consistently positive bottom-line results that can contribute to further strengthening of its risk-adjusted capitalisation over the next few years while maintaining guarantee support.
However, factors that could lead to negative rating action include a material loss of capital, which leads to a reduced level of risk-adjusted capitalisation that does not support its ratings, and diminished strategic importance.