AM Best has affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” (Excellent) of Nova Casiopea Re S.A. (NCRe) (Luxembourg). The outlook of these credit ratings is stable. The ratings reflect NCRe’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. According to AM Best, NCRe operates as a single parent captive of Telefónica, S.A., a multinational broadband and telecommunications provider based in Spain, with operations in Europe, as well as North, Central and South America. In 2017, NCRe took over Casiopea Re S.A. (CRe), the former captive of Telefónica, assumed its liabilities and mirrored its operations. From this acquisition, NCRe has benefitted from Telefonica’s geographic diversification across Europe and South America, says AM Best. NCRe maintains a broad portfolio mix, but as a pure captive, its business profile remains constrained to Telefonica’s operations and strategic decisions, the ratings company adds. NCRe’s balance sheet strength assessment is underpinned by the strongest level of risk-adjusted capitalisation, on both standard and catastrophe-stressed basis, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best concludes that this assessment is supported by NCRe’s conservative and liquid investment portfolio, as well as capital buffers in the form of equalisation reserves and that an offsetting factor is the company’s elevated exposure to natural catastrophe risk, which has the potential to introduce volatility to capitalisation levels.
