AM Best has affirmed the credit ratings of RB-Brasil Resseguros S.A. (IRB) and assigned a negative outlook, as the agency acknowledges the reinsurer’s capital adequacy improvements.
IRB’s Financial Strength Rating is A- (Excellent) and its Long-Term Issuer Credit Rating is “a-” (Excellent).
According to the announcement, these ratings reflect the reinsurer’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The credit rating agency stated: “AM Best’s concerns with the company’s capital adequacy have been mitigated to some degree following the completion of its capitalization offer and improvement in its risk-adjusted capitalization levels, as measured by Best’s Capital Adequacy Ratio (BCAR).
“The negative outlooks reflect that while IRB has improved its operating performance, a material interruption or deviation on such a trend most likely will lead to a rating downgrade.
AM Best considers IRB’s maintains a strong balance sheet. The reinsurer’s surplus has grown over the past five to six years and its BCAR scores are in the top category for a company at this rating level.
The balance sheet also benefits from protection via a retrocession program with highly rated reinsurers that limits IRB’s net exposures to manageable levels, the agency also noted.
Additionally, AM Best has assessed IRB’s operating performance as adequate due to the changes in its results, as the company has improved its operating performance throughout 2023.
IRB has achieved this, the agency explains, by refining its portfolio cleanup, which aided in the recovery from its performance in prior years.
Brazil’s macroeconomic conditions are a factor that could lead to negative rating action, as these could contribute further to a deterioration of IRB’s operating performance and become an obstacle to its ability to raise capital if needed, AM Best warns.
On the other hand, positive rating actions could take place if IRB continues to show improvements in its operating performance by implementing its transformation strategy.
