AM Best


AM Best Affirms Credit Ratings to Compañía Reaseguradora del Ecuador S.A.


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Elí Sánchez
Associate Director
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eli.sanchez@ambest.com

Alfonso Novelo
Senior Director, Analytics
+52 55 1102 2720, ext. 107
alfonso.novelo@ambest.com
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
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Jim Peavy
Director, Communications
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FOR IMMEDIATE RELEASE

MEXICO CITY - OCTOBER 22, 2021 01:22 PM (EDT)
AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” (Good) of Compañía Reaseguradora del Ecuador S.A. (Ecua Re) (Ecuador). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Ecua Re’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The stable outlooks are derived from Ecua Re’s market position and its access to the primary insurance business in Ecuador amid growing business opportunities in the country.

Ecua Re was established in 1977 and is the only domestic reinsurer operating in Ecuador. The company provides reinsurance solutions for the country’s domestic insurers. Its business portfolio is mostly composed of property risks, mainly fire and auto, with a small component of casualty and life risks. The company likely will benefit from recent regulatory changes allowing primary insurers to cede personal lines that previously were restricted.

The company’s largest shareholder is Hannover Re, which has a 30% ownership stake via its wholly owned subsidiary, FUNIS GmbH & Co. KG; six local insurers hold 40% of the company. Ecuador’s economic prospects have improved in 2021 due to a favorable market perception of the new government; however, AM Best will continue to assess the impact of economic developments in the insurance market. Partially mitigating AM Best’s concern over the economic environment is that Ecua Re’s business profile benefits from its ownership, which provides access to quality business while at the same time maintaining reinsurance capacity through its main shareholder.

Ecua Re’s balance sheet strength is considered very strong, as risk-adjusted capitalization reflects the company’s ability to manage its risk exposures, supported by a comprehensive reinsurance program led by Hannover Re. Furthermore, the company gains financial flexibility through an Ecuador law that requires shareholders with a stake higher than 12% to assume additional financial responsibility in the event of insufficient shareholders’ funds. Partially mitigating factors are the company’s capital volume and the substantial amount of dividends paid in relation to net income in past years. ERM practices are considered appropriate given the company’s comprehensive and appropriate risk framework.

AM Best views the company’s operating performance as strong, given its consistent positive technical performance during the last five years. Additionally, its retrocession profile provides revenue from ceding commissions and mitigates claim costs, as experienced in the 2016 earthquake. As of August 2021, the company posted a return on premium of 15%.

Positive rating actions could take place if the company can increase its capital base in a stable manner while achieving the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Negative rating actions could take place if the company’s business growth or available surplus limits AM Best’s view of Ecua Re’s capitalization, through either an abrupt business increase without capital contributions or a decline in equity from the payment of dividends or negative results.

The methodology used in determining these ratings is Best’s Credit Rating Methodology (Version Nov. 13, 2020), which provides a comprehensive explanation of AM 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:


  • Evaluating Country Risk (Version Oct. 13, 2017)

  • Understanding Global BCAR (Version July 22, 2021)

  • Catastrophe Analysis in AM Best Ratings (Version Oct. 13, 2017)

  • Available Capital & Holding Company Analysis (Version Oct. 13, 2017)

  • Scoring and Assessing Innovation (Version March 5, 2020)

View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, please refer to Guide to Best’s Credit Ratings.


  • Previous Rating Date: Nov. 11, 2020

  • Date Range of Financial Data Used: Dec. 31, 2015–Aug. 31, 2021

This press release relates to rating(s) that have been published on AM Best’s website. For additional 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 see AM Best’s Recent Rating Activity web page.

AM Best does not validate or certify the information provided by the client in order to issue a credit rating.

While the information obtained from the material source(s) is believed to be reliable, its accuracy is not guaranteed. AM Best does not audit the company’s financial records or statements, or otherwise independently verify the accuracy and reliability of the information; therefore, AM Best cannot attest as to the accuracy of the information provided.

AM Best’s credit ratings are independent and objective opinions, not statements of fact. AM Best is not an Investment Advisor, does not offer investment advice of any kind, nor does the company or its Ratings Analysts offer any form of structuring or financial advice. AM Best’s credit opinions are not recommendations to buy, sell or hold securities, or to make any other investment decisions. View our entire notice for complete details.

AM Best receives compensation for interactive rating services provided to organizations that it rates. AM Best may also receive compensation from rated entities for non-rating related services or products offered by AM Best. AM Best does not offer consulting or advisory services. For more information regarding AM Best’s rating process, including handling of confidential (non-public) information, independence, and avoidance of conflicts of interest, please read the AM Best Code of Conduct. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.


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AMB# Company Name
077239 Compania Reaseguradora del Ecuador SA