AM Best has removed from under review with developing implications and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of "a-" of Ocean International Reinsurance Company Limited (Ocean Re) (Barbados). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Ocean Re’s balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
In February 2020, AM 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 Inc. (QDOV, previously named Energy Risk Indemnity Reinsurance Inc.). Since then, Ocean Re has provided needed information, including consolidated audited financial statements, and shown progress in the alignment of its corporate structure and implementation of its strategy, relieving AM Best’s concerns.
The stable outlooks derive from the reinforced capital base of the company after its acquisition, which provides the company the capacity to expand into new markets and products. The stable outlooks also recognize disciplined underwriting by the company and profitable results amid an unfavorable business cycle.
Ocean Re is a Barbados-based reinsurer, 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 programs that are fully funded to the projected ultimate losses of the company’s clients. Its 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 (CIMA), and Far East, which would diversify the portfolio.
The company’s risk-adjusted capitalization remains at strongest levels and has benefited from a capital contribution received in early 2020. AM Best 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 program for its expanding traditional reinsurance lines. So far, 2020 is proving to be a challenging year for 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 capitalization 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.
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.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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