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FOR IMMEDIATE RELEASE
OLDWICK - OCTOBER 22, 2014 12:11 PM (EDT)
A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a-" of Barents Re Reinsurance Company Inc. (Barents) (Panama City, Panama). The outlook for both ratings remains positive.
The affirmation of the ratings of Barents reflects its excellent capital position, its good bottom line results, a supportive and strong reinsurance program and the good management capabilities of the company, which are further strengthened by adequate enterprise risk management (ERM) practices. Mitigating these positive rating factors is the company's recent incursion outside Latin America as part of its strategy to expand its geographic footprint and widen its services into additional business lines. Although not present so far, the potential for volatility in underwriting results in the medium term remains a concern given the short track record of these operations.
During 2013, Barents made use of its most recent capital injection by further expanding into Europe, Middle East and North Africa (MENA) and improving its business in Latin America. Positive net income, along with its solid expense and loss ratios, are evidence of the success of the strategy thus far. The access to good quality reinsurance providers and programs has been key to its success, in tandem with the implementation of new ERM practices that have improved its risk selection profile. The company's capitalization is one of its main strengths, which in conjunction with prudent risk appetite standards, is the key factor for continuing the implementation of its strategy.
Offsetting these positive rating factors is the future development of the expansion strategy into new markets and products, which so far has been successful but still has to mature as it is fully implemented. The entrance into new geographies and new lines of business creates uncertainty over expected results, given the level of maturity and strong competitive environment of these markets; however, this uncertainty is natural to a reinsurer that focuses on niche markets.
A.M. Best considers Barents to be well- positioned for its current rating level. Positive rating actions could occur if the company is able to maintain its profitability throughout the implementation of its strategy, while maintaining its solid capital position and succeeds in entering the new markets it is currently exploring.
Barents' capitalization is strong and can withstand extreme adversity nevertheless; negative rating actions could derive from a sustained reduction in the capital position to levels non-supportive of the current ratings.
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:
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.