A.M. Best has removed Ocean International Reinsurance Company Limited (Ocean Re), based in Barbados, from under review with developing implications and affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-”.
The outlook assigned to these credit ratings is stable.
The ratings reflect Ocean Re’s balance sheet strength, which A.M. Best categorised as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
In February this year, A.M. Best placed Ocean Re’s ratings under review with developing implications to reassess the company’s financial strength, corporate structure and strategy following completion of the acquisition of a major share of the company by QD Overseas Ventures (QDOV), previously named Energy Risk Indemnity Reinsurance.
A.M. Best noted that since it was placed under review, Ocean Re has provided the information needed, including consolidated audited financial statements, and has shown progress in the alignment of its corporate structure and implementation of its strategy.
“The stable outlooks derive from the reinforced capital base of the company after its acquisition, which provides the company with the capacity to expand into new markets and products. The stable outlooks also recognise disciplined underwriting by the company and profitable results amid an unfavourable business cycle,” according to A.M. Best.
Ocean Re is licensed as a Class 2 insurance company, which offers a diversified product mix throughout Latin America and other strategically identified geographic markets.
The company also offers facultative programmes that are fully funded to the projected ultimate losses of the company’s clients. The firm’s business development strategy clearly identifies an increase in the proportion of traditional reinsurance in its portfolio, as compared with its captive portfolio.
Ocean Re’s regional geographic footprint continues to expand, reaching into 83 countries throughout Latin America and other countries beyond the region.
Ocean Re foresees significant growth potential in Panama, Colombia and Mexico, as well as Guatemala, Argentina, Ecuador, Paraguay, Peru and other countries in the Middle East and North Africa, Inter-African Conference on Insurance Markets, and the Far East, which would diversify the portfolio.
The company’s risk-adjusted capitalisation remains at strongest levels and has benefited from a capital contribution received in early 2020.
A.M. Best stated that they will continue to monitor Ocean Re’s balance sheet strength, particularly given the influence that its holding company exerts on it due to its financial leverage and evolving corporate structure.
Ocean Re’s operating performance in 2019 resulted in positive net income, due to good levels of premium sufficiency derived from the nature of its captive business, as well as from an adequate retrocession programme for its expanding traditional reinsurance lines.
This year is proving to be a challenging year for a business generation; nevertheless, underwriting performance continues to drive the company’s strategy, either through higher risk-taking or through improved underwriting standards for new captive business.
Negative rating actions could derive from material changes to risk-adjusted capitalisation as a result of significant losses or if Ocean Re fails to implement its business strategy successfully. Positive rating actions are not foreseen in the medium term.