//BestWire// - AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of "a" (Excellent) of Barents Re Reinsurance Company, Inc. (Barents Re) (Cayman Islands) and its affiliate, Barents Reinsurance S.A. (Barents Re Lux) (Luxembourg). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Barents Re's balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The rating affirmations reflect Barents Re's risk-adjusted capitalization at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR), the improvement in the company's corporate governance framework, and consistent profitability. AM Best remains concerned with respect to the execution risk of the strategy generated by the constantly shifting regional composition of Barents Re's business portfolio.
The ratings of Barents Re Lux reflect its strategic importance to and the support it receives from Barents Re. Barents Re Lux is part of the Barents Re rating unit, and is fundamental to the group's overall strategy. Barents Re also provides parental guarantee and reinsurance support to Barents Re Lux.
Barents Re's business portfolio in 2023 grew 7% year-over-year, mainly driven by its specialty lines. Overall, the Europe-sourced business represents 80% of Barents Re's portfolio, with the Latin America region generating 12% and the Middle East and North Africa regions holding the rest as of year-end 2023. The company is supported by its diversified and comprehensive reinsurance programs, which are placed among reinsurers with a good level of security, a key characteristic that Barents Re has adopted to enter new business lines and regions prudently.
Although Barents Re's operating performance has shifted over time toward a different structure, its current metrics still compare favorably with the market. As of June 2024, the company presented a positive bottom-line result of USD 22.67 million, showing resilience in current market conditions. Although there is volatility present in the company's premium volume and the composition of its business portfolio, Barents Re has produced consistently positive operating earnings across multiple underwriting cycles.
Barents Re's risk-adjusted capitalization was further reinforced in 2023, and mainly underpinned by its positive bottom-line results in the last years. The company's reinsurance program adequately covers exposures, and its net exposures to catastrophe events do not represent a significant portion of its reported surplus.
Factors that could lead to negative rating actions are the deterioration in the expected performance of Barents Re in terms of profitability and capital generation. Negative rating actions could also occur as a result of a breakdown in its corporate governance due to regulatory issues or a breach in controlling its operational risks. Negative rating actions could also take place if the constantly shifting business mix has a detrimental effect on the company's results or risk-adjusted capitalization. Although unlikely, positive rating actions could take place as a result of a successful consolidation of Barents Re's business strategy in targeted locations.
The methodology used in determining these ratings is Best's Credit Rating Methodology (Version Aug. 29, 2024), 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:
· Available Capital and Insurance Holding Company Analysis (Version Aug. 15, 2024)
· Catastrophe Analysis in AM Best Ratings (Version Feb. 8, 2024)
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