AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of "bbb" of Sura Re Ltd. (Sura Re) (Bermuda). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Sura Re’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
Sura Re is the wholly owned startup captive reinsurer of Suramericana S.A. (Sura), which in turn is 81.1% owned by Grupo de Inversiones Suramericana S.A. The company was established in Bermuda as a Class 3A insurer in December 2015. Its main purpose is to participate in property business underwritten by Sura’s affiliates across Latin America (i.e., Argentina, Brazil, Chile, Colombia, El Salvador, México, Panamá, Dominican Republic and Uruguay). AM Best recognizes the strategic role that Sura Re aims to achieve in Sura’s overall regional strategy; however, Sura Re’s business profile is considered limited given its accessibility to markets when compared with other commercial reinsurers.
AM Best categorizes the company’s balance sheet strength as very strong, as risk-adjusted capitalization is more than adequate for the risks it holds. During 2020, capital requirements reflected higher premium risk as the company retained a higher portion of risks; going forward, AM Best expects capital requirements to be stable without dividend payments in the medium term. Asset-liability management follows a very conservative investment policy focused on maintaining liquidity to cover its obligations in terms of tenure and currencies. Additionally, AM Best considers the company’s ERM practices as appropriate given the complete support by Sura’s expertise and management team.
As of December 2020, the company reported positive net profit for the second consecutive year since its inception. Nevertheless, operating performance still reflects a strong dependence on investment income to cover administrative expenses, for which AM Best remains attentive to macroeconomic conditions and its impact on the company’s investment results. The captive nature of the company within the fourth largest insurance group in Latin America provides flexibility in terms of growth and premium risk to manage its capital and return positions efficiently in the future. AM Best therefore considers operating performance to be adequate for the current ratings.
Negative rating actions could take place if the company fails to meet its financial performance objectives at a level that impacts capital, and therefore, its risk-adjusted capitalization, either by business decisions, importance to its financial group or deteriorating macroeconomic conditions. Positive rating actions could take place in the medium term if Sura Re is able to deploy its capital profitably through its net results while strengthening its capital position.
AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
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