Patria Re (US), Inc., a relatively new reinsurer in the United States, has been assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb+” (Good) by AM Best, with a stable outlook.
The global ratings agency says that the ratings reflect Patria US’ balance sheet strength which has been assessed as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
The reinsurer’s capital base is expected to strengthen under capital contributions planned for the future.
AM Best states that the ratings also reflect the reinsurer’s affiliation and strategic importance to its ultimate parent, Peña Verde, S.A.B., a group in Mexico’s insurance and reinsurance industries, which provides synergies and operating efficiencies.
These ratings also reflect the support received from its immediate parent, Reaseguradora Patria, S.A. (Patria Re), the lead company of the Peña Verde group and an established reinsurance company in Latin America.
Patria Re (US) was formed in February after receiving authorization in the United States from the South Carolina Department of Insurance, where the company is domiciled.
AM Best views the reinsurer’s operating performance as adequate, and notes that the initial bulk of business consists of a diverse mix of premiums retroceded from Patria Re along with a profitable track record. Synergies with Patria Re and the small size of Patria US’ operation are expected to help keep operating expenses stable.
Supporting its ratings is the fact Patria US shares all of the group’s comprehensive ERM infrastructure and practices, as well as the expertise from its shared management team. Hence, AM Best considers the company’s ERM assessment as appropriate for its risk appetite and as being strongly supported by the holding company’s back office.
The stable outlooks reflect the support Patria US receives from its group, which translates into capital contributions when required, as well as profitable business cessions to back up growth, given the strategic importance of the new entity.
AM Best said: “Positive rating actions could occur if Patria US is able to strengthen its capital base through capital contributions and profitable results, elevating its risk-adjusted capitalization to the strongest level. Negative rating actions could take place should the operating performance of the inherited business portfolio deteriorate to a point where it is no longer profitable and significant losses translate into a weakened capital base. Negative rating actions could also take place if the support that Patria Re US receives from its group decreases in AM Best’s opinion.”
