Best’s News & Research Service - December 17, 2014 10:51 AM (EST)
A.M. Best Affirms Ratings of IRB Brasil Resseguros S.A.
Oldwick //BestWire// - A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a-" of IRB Brasil Resseguros S.A. (IRB) (Brazil). The outlook for both ratings is stable.
The ratings reflect IRB's strong business profile in the Brazilian reinsurance market, solid overall financial performance and excellent risk-adjusted capitalization. Despite intense competition since the reinsurance market opened in Brazil in 2007, IRB continues to hold the largest market share by a wide margin. As competition continues to grow in Brazil given the open market, IRB has enacted various initiatives to maintain strong market share and to position itself for an international expansion. IRB has completed its privatization in recent months, when the Brazilian government reduced its stake in IRB and ceased to be its sole controlling shareholder. Overall, IRB continues to have a unique and strong position in the growing Brazilian (re)insurance market, along with its defined strategy and experienced personnel to execute its business plans. A.M. Best recognizes that IRB continues to be in a state of transition and will closely monitor this phase of its development, particularly as it moves into new markets.
Rating factors that could cause a rating upgrade and/or revised outlook to positive include consistently maintaining strong risk-adjusted capital and a strong operating performance.
Partially offsetting these positive rating factors are the significant competitive market pressures on IRB as more reinsurance companies enter the Brazilian market each year, as well as potentially new or altered regulatory requirements, which may or may not be favorable to the company. These challenges and other rating factors, which could lead to a downgrading of the ratings and/or a revision of the outlook to negative, include a material loss of capital, whether it is driven by investment losses or underwriting losses, increased volatility with regards to operating performance relative to other market participants, or a material decline in the company's risk-adjusted capital if, for example, premium growth is pursued in a manner that strains its claims paying ability.
Brazil offers the largest (re)insurance market in Latin America; it has the largest population in South America and is among the 10 largest economies in the world by gross domestic product. Currently, Brazil has a low insurance penetration and a favorable economic environment, which represents significant growth potential, making it an attractive place for (re)insurance companies. In Brazil, reinsurance companies fall into three categories depending on a company's participation and financial commitment: "local," "admitted" and "occasional." IRB is a "local" reinsurance company and, up until the opening of the reinsurance market in 2007, it enjoyed a long-standing monopoly. IRB has predominately operated as a property/casualty reinsurer with a small amount of life business.
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:
- Risk Management and the Rating Process for Insurance Companies
- Evaluating Country Risk
- Understanding Universal BCAR
- Understanding BCAR for Property/Casualty Insurers
This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best's Ratings & Criteria Center.
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