AM Best Downgrades Evergreen Credit Ratings

November 14, 2016

Rating company A.M. Best has downgraded the Financial Strength Rating to A- [Excellent] from A [Excellent] and the Long-Term Issuer Credit Rating to “a-” from “a” of Evergreen Insurance Company Limited [EICL] [Bermuda]. The outlook of these Credit Ratings [ratings] is stable.

A statement from the ratings agency said, “The rating downgrades reflect the reduced risk-adjusted capitalization due to a dividend payment made in 2016, which exceeded the total net income it generated in the past three fiscal years, and EICL’s issuance of a loan to the parent company, Evergreen International S.A.

“In addition, EICL underwrites sizeable gross risks relative to its capital level. Under the stress test scenario assuming a portion of EICL’s reinsurance ceded losses are unrecoverable due to reinsurer default, EICL would have less cash and capital buffer to support this reinsurance credit risk.

“EICL is a pure captive of the Evergreen Group underwriting risks in marine, aviation, property, engineering, motor and other liability related to the group’s operations.

“The company’s profitability remains strong and its risk-adjusted capitalization is expected to improve gradually with no dividend payout in the medium term, notwithstanding the current soft market conditions and the company’s expectation of exposure growth from the group’s business expansion.

“Positive rating action is unlikely in the near term. Negative rating action could occur if EICL’s absolute capitalization declines materially or its risk-adjusted capitalization further decreases sharply.

“A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit here.

“Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication. “

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