AM Best Downgrades Credit Ratings of Sun Re Ltd; Places Credit Ratings Under Review With Negative Implications; Withdraws Credit Ratings
18 Junio 2024 - 5:46PM
Business Wire
AM Best has downgraded the Financial Strength Rating to B
(Fair) from B+ (Good) and the Long-Term Issuer Credit Rating to
“bb” (Fair) from “bbb-” (Good) of Sun Re Ltd (Sun Re) (Saint Kitts
and Nevis). At the same time, AM Best has placed these Credit
Ratings (ratings) under review with negative implications.
Concurrently, AM Best has withdrawn these ratings as the company
has requested to no longer participate in AM Best’s interactive
rating process.
The ratings reflect Sun Re’s balance sheet strength, which AM
Best assesses as adequate, as well as its adequate operating
performance, limited business profile and marginal enterprise risk
management (ERM).
The rating downgrades reflect Sun Re’s weakened balance sheet
strength driven by challenges in sourcing investment alternatives
to unrated affiliated counterparties as the company aims to derisk
its investment portfolio. This resulted in concentrated allocations
to unrated payment platforms in the second quarter of 2024,
expected to remain until the company can transfer these funds into
more traditional bank accounts. The ratings have been placed under
review with negative implications to reflect pressures on the
balance sheet strength and ERM assessments due to the execution
risk associated with the restructuring of the company’s investment
portfolio.
Sun Re’s balance sheet strength assessment factors in the
company’s risk-adjusted capitalisation, as measured by Best’s
Capital Adequacy Ratio (BCAR), which is expected to be at the
strong level at year-end 2023, negatively impacted by increased
investment charges applied in the model to reflect the significant
concentration and credit risk associated with assets held through
affiliated companies at the time. The assessment also considers the
company’s moderate dependence on retrocession, and its exposure to
the high economic and moderate financial system and political risk
in Saint Kitts and Nevis.
Sun Re’s operating performance has been impacted negatively by
volatile technical results in recent years, with a five-year
average (2018-2022) combined ratio of 108.6% (as calculated by AM
Best), due to individual large contracts with high loss ratios
associated with legacy business. Unaudited results for 2023
indicate a return to technical profitability as the company has
focused on underwriting discipline and risk selection. Prospective
technical results remain exposed to volatility due to an evolving
underwriting portfolio, in terms of lines of business and risk
locations, as the company executes its business plan. Sun Re’s net
investment returns contribute modestly, albeit positively, to the
company’s operating profitability.
Sun Re is a specialist facultative reinsurer underwriting risks
in multiple territories and lines of business. The company sources
a material portion of its premiums from Sun Underwriting MGA, whose
ultimate shareholder is the same as Sun Re’s. Given its relatively
small scale, the company does not have an established profile in
the international markets in which it operates.
This press release relates to Credit Ratings that have been
published on AM Best’s website. For all 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. For additional information regarding the use and
limitations of Credit Rating opinions, please view Guide to Best’s
Credit Ratings. For information on the proper use of Best’s Credit
Ratings, Best’s Performance Assessments, 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 specialising 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. For more
information, visit www.ambest.com.
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Emily Thompson Senior Financial Analyst +44 20 7397
0291 emily.thompson@ambest.com
Ghislain Le Cam, CFA, FRM Senior Director, Analytics
+44 20 7397 0268 ghislain.lecam@ambest.com
Christopher Sharkey Associate Director, Public
Relations +1 908 882 2310
christopher.sharkey@ambest.com
Al Slavin Senior Public Relations Specialist +1
908 882 2318 al.slavin@ambest.com