OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a+” of Scotia Insurance (Barbados) Limited (Scotia Re) (Barbados). The outlook for both ratings is stable.

Scotia Re is primarily a life reinsurer that is ultimately owned by The Bank of Nova Scotia (Scotiabank). Scotia Re principally reinsures credit insurance policies underwritten by third-party life insurance carriers on consumer loans originated by Canadian, Latin American and Caribbean retail branches of Scotiabank. Scotia Re then retrocedes the Canadian risks to unaffiliated reinsurers and accepts similar non-Canadian risks from those unaffiliated reinsurers. In addition, Scotia Re also accepts a moderate level of international property/casualty risks.

The rating affirmations reflect Scotia Re’s adequate levels of capitalization and geographically diversified revenue and operating earnings, which differentiate it somewhat from its peers. Additionally, the ratings reflect Scotia Re’s enterprise risk management (ERM) framework, which is well integrated into its ultimate parent’s ERM risk process, and its highly liquid investment portfolio that consists primarily of term deposits with a bank affiliate and other North American financial institutions.

These strengths are partially offset by Scotia Re’s dependence upon consumer loan originations within Canada, and to a lesser extent, Latin America and the Caribbean. Premium growth has the potential to decline if consumer loan originations slow in any of these markets. Additionally, a further decline in economic conditions in Europe could impact the company’s ability to retrocede assumed risks to its European counterparties. Scotia Re is exposed to potential earnings volatility from its assumed property catastrophic risk, which could impact capital levels.

Scotia Re is considered well positioned at its current rating level. Positive rating actions are unlikely in the near or intermediate term. Factors that may cause negative rating actions include significant adverse changes in the company’s capitalization, operating performance or business model. Such changes could include a material shift in business growth within property catastrophic risk exposure relative to its core credit insurance business.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at http://www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Co.
Anthony McSwieney
Senior Financial Analyst
908-439-2200, ext. 5715
anthony.mcswieney@ambest.com
or
Rosemarie Mirabella, CPA, CFA
Managing Senior Financial Analyst
908-439-2200, ext.5892
rosemarie.mirabella@ambest.com
or
Rachelle Morrow
Senior Manager, Public Relations
908-439-2200, ext. 5378
rachelle.morrow@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
908-439-2200, ext. 5644
james.peavy@ambest.com

Source: A.M. Best Co.