AM Best has revised the outlooks to positive from stable of Ocean Re, a Barbados-based reinsurer, a move that recognizes its disciplined underwriting.
The rating agency also affirmed the reinsurer’s Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Rating (Long Term ICR) of “a-” (Excellent).
“The Credit Ratings (ratings) reflect Ocean Re’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),” AM Best stated.
Adding: “The positive outlooks recognize the disciplined underwriting by the company to deploy its capital with profitable results. Operating performance metrics continue showing a positive trend, in conjunction with growth targets based on diversified geographical exposures, potential new businesses and successful growth of the risk-bearing portfolio.”
Ocean Re is licensed as a Class 2 insurance company, it offers a diversified product mix worldwide with a relevant presence in Latin America. It also offers facultative reinsurance programs, which are fully funded to the projected ultimate losses of the company’s clients.
According to AM Best, Ocean Re’s business development strategy clearly identifies an increase in the proportion of traditional reinsurance in its portfolio, as compared with its captive portfolio.
As it has expanded its geographic footprint, it has been able to further diversify its risks insured throughout Latin America, Asia, the Middle East and North Africa, among other regions.
To further improve its underwriting, the company has acquired some of its business partners’ operations, as well as personnel), gaining expertise and exclusivity over those channels, regions and markets, the rating agency noted.
Ocean Re’s risk-adjusted capitalization remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR) and has benefited from a capital contribution received in early 2020 and profitable results up to Sept. 30, 2023.
Additionally, the broader geographic diversification could reflect an improvement in the required capital over the medium term.
However, AM Best will continue to monitor the influence of the holding company on the reinsurer’s balance sheet strength, “due to its financial leverage and evolving corporate structure,” the agency highlighted.
The reinsurer’s operating performance in 2022 and up to September 2023 saw a positive net income thanks to good levels of premium sufficiency.
The positive result, analysts explain, was derived from the performance of its expanding traditional reinsurance lines, as well as from the nature of its captive business. developed, with appropriate ERM policies and procedures to mitigate any upcoming risk.
AM Best concluded: “Positive rating actions could take place as a result of the successful evolution of Ocean Re’s diversification strategy, in line with the positive trend in operating performance metrics.
“Negative rating actions could occur from material changes to risk-adjusted capitalization either as a result of losses or implementation risk of the business strategy. Also, negative rating actions could occur if there is an increase in the financial leverage of the holding company putting pressure on the balance sheet strength of Ocean Re.”
