A.M. Best Affirms Credit Ratings Of Maxseguros

August 27, 2018

A.M. Best has affirmed the Financial Strength Rating of A- [Excellent] and the Long-Term Issuer Credit Rating of “a-” of Maxseguros EPM Ltd. [Maxseguros] [Bermuda]. The outlook of these Credit Ratings [ratings] is stable.

A statement from the ratings agency said, “The ratings reflect Maxseguros’ balance sheet strength, which A.M. Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

“The ratings also reflect Maxseguros’ strong risk-adjusted capitalization, supported by a comprehensive and adequate reinsurance program coupled with conservative balance sheet strategies, as conservative investment policy and limited premium risk exposure. Additionally, the ratings recognize the support of its parent, Empresas Publicas de Medellin E.S.P. [EPM], owned by the Colombian municipality of Medellin. EPM is the largest power generation and multi-utility company in Colombia. Maxseguros is a single-parent captive insurer wholly owned by EPM, which provides reinsurance to the EPM group, covering property damage and business interruption, commercial crime, directors and officers and construction liability exposures.

“These positive rating factors are offset partially by Maxseguros’ limited business and market scope, which is somewhat mitigated by the company’s stable results, favorable geographic spread of risk and the history of Maxseguros’ growing surplus position, as well as the support of its ultimate parent, EPM. Additionally, while Maxseguros depends on reinsurance, EPM’s senior management is involved intimately in the captive’s operations.

“The stable outlooks are derived from Maxseguros’ ability to sustain a strong level of operating performance due to its demonstrated risk management expertise and conservative underwriting criteria. This held true in 2016 and 2017, when the company presented net claims while producing constant positive bottom line results. A.M. Best has a favorable view of Maxseguros’ overall profile within the ultimate parent’s structure and recognizes the benefits inured from this. Particular attention is paid to EPM senior management’s active involvement.

“Positive rating triggers could include sustained positive operating results and improved risk-adjusted capitalization. Negative rating impact could occur if underwriting performance declines or demonstrates volatility that negatively impacts earnings and capitalization over time. Negative rating impact also could occur if there is a material shift in risk profile that potentially could undermine the stability and profitability of the company, or if financial issues arise and place pressure on the ratings or the parent’s credit profile.”

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