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AM Best downgrades credit ratings of IRB Brasil Re

1st June 2020 - Author: Luke Gallin

Global financial services ratings agency A.M. Best has downgraded the credit ratings of IRB Brasil Resseguros SA (IRB Brasil Re) and maintained the under review with negative implications status on these ratings.

irb brasil reSpecifically, A.M. Best has downgraded the Financial Strength Rating to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Rating to “a-” from “a” of IRB Brasil Re, reflecting the ratings agency’s revised view of the company’s enterprise risk management (ERM).

This revised view follows the reinsurer’s “failure to establish adequate risk management tools to ensure meeting appropriate regulatory liquidity metrics” determined by the Brazilian re/insurance industry regulatory authority, SUSEP, which ultimately led to a special regulatory inspection.

The ratings agency says that in its view, IRB Brasil Re should have both resources and management capabilities to avoid such a regulatory breach.

It’s been an interesting year for the company, which includes the sudden departure of its senior management as a result of governance issues, followed by some significant changes at board level.

A.M best warns that the recent, high-level departures have created uncertainty regarding the strategic direction of the firm.

The ratings agency placed the firm’s ratings under review with negative implications in early March, and has maintained this view alongside the downgrades. A.M. Best says that this reflects its ongoing concerns surrounding the effectiveness of the reinsurer’s governance and risk management.

Towards the end of April, IRB Brasil Re withdrew its profit guidance as a result of the COVID-19 pandemic, which also caused the firm to delay its Q1 results.

Prior to reports concerning an investigation by the securities regulator, it had been reported that IRB Brasil Re was in advanced talks with rivals across Latin America as it looks to purchase portfolios and bolster its position in the region.

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