The ratings of Atradius’ main operating entities reflect A.M. Best’s expectation that Atradius’ consolidated risk-adjusted capitalisation will be maintained at an excellent level, underpinned by the group’s strong earnings generation. The group’s financial leverage and interest coverage ratios are well within the tolerance levels for its ratings, and its balance sheet remains supported by a conservative investment and reserving strategy, as well as an effective reinsurance programme. Strong risk-adjusted capitalisation is maintained at each of the rated subsidiaries.
Some uncertainty exists with the sustainability of Atradius’ strong technical performance, as it progresses with its expansion plans. This reflects the highly competitive nature of trade credit insurance, together with the pressure that accumulating years of relatively low claims experience is putting on declining rates, and terms and conditions. Additionally, as with other credit insurers, the threat of a heightened insolvency environment, owing to the reduced level of economic activity in emerging nations, may generate volatility in technical results, due to the high correlation of the group’s earnings with fluctuations in the economic environment. Nonetheless, the group’s technical earnings are expected to be supported by management’s ability to take risk-mitigating actions on non-performing business when required.
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