Best’s News & Research Service - October 01, 2014 11:10 AM (EDT)
A.M. Best Affirms Ratings of Casiopea Re S.A.
London //BestWire// - A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a-" of Casiopea Re S.A. (Casiopea Re) (Luxembourg). The outlook for both ratings remains stable.
Casiopea Re is a captive of Telefónica S.A. (Telefónica) (Spain), a leading provider of telecommunication services across Europe and Latin America.
The ratings reflect Casiopea Re's excellent risk-adjusted capitalisation, as well as its good, albeit volatile, operating performance. An offsetting factor is potential drag from its parent, Telefónica, which continues to face challenging conditions in its domestic market.
Casiopea Re's risk-adjusted capitalisation is likely to remain at an excellent level, supported by good internal capital generation. In addition, the captive has a comprehensive reinsurance programme in place with a panel of financially strong reinsurers, which mitigates the risk of large property and liability losses depleting capital. As the main reinsurer of group risks, Casiopea Re's risk management is closely integrated with that of Telefónica.
The company has a track record of good, albeit volatile, operating performance, and has reported an underwriting profit in four of the past five years. In 2013, Casiopea Re achieved a strong pre-tax profit of EUR 28.5 million, which equated to an adjusted return on capital and surplus of 9.2%. The strong result was mainly driven by benign claims experience, as well as the favourable development of property and business interruption reserves.
An improvement in the financial profile of Telefónica may lead to a positive rating action for Casiopea Re. Negative rating actions could follow a prolonged period of weak underwriting results, as well as a significant deterioration in Casiopea Re's risk-adjusted capitalisation.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best's Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- Alternative Risk Transfer (ART)
- Catastrophe Analysis in A.M. Best Ratings
- Evaluating Non-Insurance Ultimate Parents
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding BCAR for Property/Casualty Insurers
- Understanding Universal BCAR - A.M. Best's Capital Adequacy Ratio for Insurers
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
This rating announcement has been issued by A.M. Best Europe - Rating Services Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.