Best’s News & Research Service - August 20, 2014 03:09 PM (EDT)
A.M. Best Affirms Ratings of Royal Bank of Canada Insurance Company Ltd.
Oldwick //BestWire// - A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of "a+" of Royal Bank of Canada Insurance Company Ltd. (RBCICL) (Barbados). The outlook for both ratings is stable.
RBCICL is a reinsurer that is ultimately owned by Royal Bank of Canada (Toronto, Ontario), one of the largest full service banks in Canada, as measured by assets. RBCICL primarily reinsures life/health insurance risks from unaffiliated international reinsurers, as well as credit reinsurance risks from European reinsurers. The company participates as a treaty partner in life retrocession pools, trade credit pools and annuity longevity reinsurance.
The rating affirmations reflect RBCICL's diversified operating profile, solid capitalization and strong liquidity position. RBCICL's investment portfolio is composed of cash and high credit quality sovereign, corporate and supranational bonds. Profitability measures also continue to be strong and have shown improvement in each of the past five years analyzed.
While recognizing the solid market position of Royal Bank of Canada, A.M. Best notes that premium growth depends upon the strength of the global economy. Any potential decrease in consumer loan activity could adversely impact the credit insurance market. A decline in economic conditions in Europe could negatively impact RBCICL's ability to develop new counterparty treaties.
Positive rating actions are unlikely in the near to intermediate term. Factors that could cause negative rating actions include a significant decline in the company's capitalization or business outlook, a decline in operating performance that impacts its business model, or negative rating actions at Royal Bank of Canada. Furthermore, the pending federal budget to be introduced in the Canadian parliament, which may reduce certain benefits on reinsurance, could result in negative rating pressure.
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.
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