A.M. Best Affirms Ratings of CIBC Reinsurance Company Limited

A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of CIBC Reinsurance Company Limited (CIBC Re) (Barbados). The outlook for both ratings is stable.

CIBC Re is a life reinsurance subsidiary of Canadian Imperial Bank of Commerce (CIBC) (Toronto, Ontario), the fifth-largest commercial bank in Canada by assets. CIBC Re principally reinsures credit insurance policies that have been underwritten by third-party life insurance carriers on consumer mortgages, loans and credit cards originated by CIBC’s Canadian branches. Subsequently, CIBC retrocedes such risks to several unaffiliated reinsurers, and in turn, accepts non-Canadian risks of equivalent magnitude from those unaffiliated reinsurers. To a lesser extent, CIBC Re also participates in excess retrocession pools under a variety of treaties.

The ratings consider CIBC Re’s strong capitalization, good liquidity relative to its medium-term insurance obligations, in-force book of business that is diversified by geography and product type, as well as a growing Canadian economy and credit market. Although the company is subject to the loan volume originated by CIBC, in A.M. Best’s opinion, CIBC Re has the capacity to meaningfully grow premium volume given its relatively smaller size compared to its peers. CIBC Re’s financial strength and attractive profit margins are based upon a focused strategy on its core creditor life business and a portfolio of high quality assets that are well matched to the company’s liability profile. The investment portfolio is entirely made up of current and short-term deposits with related parties.

Recognizing that a significant portion of business volume is dependent upon reasonably steady credit insurance activity, A.M. Best believes that fluctuations in financial markets and waning consumer confidence could adversely impact loan origination activity at CIBC. The ratings also reflect the potential performance correlation with the Canadian economy and the international financial markets, CIBC’s position as the smallest of the major Canadian banks and the challenges in financing growth with a prudent dividend payout policy.

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.