AM Best affirmed Maxseguros EPM Ltd.’s financial strength rating of A- [Excellent] and long-term issuer credit rating of “a-” [Excellent], with stable outlooks.
The ratings agency said, “AM Best has affirmed the Financial Strength Rating of A- [Excellent] and the Long-Term Issuer Credit Rating of “a-” [Excellent] of Maxseguros EPM Ltd. [Maxseguros] [Bermuda]. The outlook of these Credit Ratings [ratings] is stable.
“The ratings reflect Maxseguros’ balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
“The stable outlooks reflect Maxseguros’ role within Empresas Públicas de Medellín E.S.P.’s [EPM] strategy, which results in financial flexibility for its balance sheet strength, as well as operating synergies that support profitable growth.
“Maxseguros, established in Bermuda in 2008, is a single-parent captive insurer wholly owned by EPM, which is owned by the Colombia municipality of Medellín. EPM is the largest power generation and multi-utility company in Colombia. Maxseguros provides reinsurance to the EPM group, covering property damage and business interruption, commercial crime, cyber risk, directors and officers, errors and omissions and general liability exposures.
“Maxseguros’ risk-adjusted capitalization stands at the strongest level, as measured by Best’s Capital Adequacy Ratio [BCAR], and supported by a comprehensive and adequate reinsurance program, coupled with a conservative investment policy and limited premium risk exposure. While Maxseguros has some reinsurance dependency, the company’s well-set underwriting and technical capabilities have allowed it to position itself as a key participant within EPM’s reinsurance panel, and the high level of security of the panel helps mitigate credit risk.
“Maxseguros’ capacity to adjust its retentions and successful commission structure have allowed the company to maintain combined ratios well within premium sufficiency levels, and profitability has been further strengthened by investment income.
“Positive rating actions could take place if Maxseguros’ operating performance reflects a consistent, upward trend of profitable underwriting and investment results that reflect a sustainable business model, improving its metrics to compare favorably with a strong assessment level. Negative rating actions could occur if there is a material shift in the risk profile or role within EPM, which undermines the stability and profitability of Maxseguros, including increased activity in cash outflows to the parent. Negative rating actions also could arise if Maxseguros’ operating performance deteriorates due to increased retentions, to a point that it is no longer supportive of the ratings and causes erosion in the company’s capital base.”