Panamanian domiciled reinsurance firm Istmo Re, or Istmo Compañía de Reaseguros, Inc. to give its full name, has had its Financial Strength Rating downgraed to a Non-Rating Designation of E (Under Regulatory Supervision) from B (Fair) and the Long-Term Issuer Credit Rating to “e” from “bb+” by A.M. Best after action by the local regulator.
On 12th December 2016 the Superintendent of Insurance and Reinsurance of Panama (SSRP) intervened at Istmo Re, stating that the reinsurance company “failed to cover the minimum regulatory requirements for paid capital, presented an inferior ratio of net premium to net surplus to that required by regulation, relied on insufficient assets to integrally satisfy its liabilities and is incapable of continuing operations without compromising the interests of policyholders,” A.M. Best said today.
The regulator reviewed Istmo Re’s unaudited third quarter financial statements and performed an on-site regulatory inspection at the reinsurers offices, however the reinsurer had also failed to act on a plan to sell its assets and reduce its outstanding debt over the last three months as well.
As a result of the review and lack of action the Director of Supervision of Insurance and Reinsurance Companies in Panama recommended the intervention at Istmo Re. A.M. Best said that this regulatory action would be anticipated to last more than 180 days.
The issue means that Istmo Re has insufficient assets to satisfy its debt obligations, with equity not fit to cover premiums and assets not fit to cover liabilities. Istmo Re has also reportedly been sued over its financial statements posted on the stock exchange.
The regulatory action will see the Panamanian regulator effectively take control of the operations at the reinsurance company until local authorities set a future course of action for Istmo Re, due to the financial issues discovered.
A.M. Best has not taken rating action on Istmo Re’s subsidiaries Liffey Reinsurance Company Designation Activity Company (Liffey Re) (Dublin, Ireland) and Aseguradora del Istmo, S.A. (ADISAP) (Panama City, Panama) at this time, but said it would monitor the ratings of the subsidiaries and Istmo Re itself as the regulatory action develops.