A.M. Best Affirms Ratings of Marble Reinsurance Corp.

A.M. Best Asia-Pacific Limited has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a- " of Marble Reinsurance Corp. (Marble Re) (Federated State of Micronesia).

The outlook of both ratings is stable.

The ratings reflect Marble Re's risk-adjusted capitalization and conservative operating strategy. Marble Re's risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio, has remained strong and is expected to improve in the mid-term, owing to strong profitability and a capital injection from the parent company, Marubeni Corp. (Marubeni) (Japan).

Marble Re reported strong profitability with an average 35 percent return on equity in the past three years, largely owing to its favorable underwriting results. The combined ratio remained at an average of 52 percent during the period with limited volatility. With enhanced capitalization through its parent's capital injection in April 2013, Marble Re began expanding the product portfolio from fiscal year 2013 by leveraging the strong relationship with Marubeni's group companies. Most of the premium from the new portfolio will be ceded to the third party reinsurers as Marble Re could secure stable income by earning ceding commissions, which indicates the limited underwriting risk from the new businesses.

Partially offsetting rating factors include an implementation risk regarding Marble Re's plan to expand its business portfolio and its parent company's credit risk profile. The expansion of product lines would create risk in its implementation given that the business scope has been limited up to marine cargo risk, despite Marubeni's long history in operating its captive business. As a single parent captive of Marubeni, Marble Re has received a wide range of support regarding capitalization, management team and its risk management scheme. As such, Marble Re's business relies on Marubeni's credit risk profile and competitiveness.

While upward movement on Marble Re's ratings is unlikely, downward pressure could arise if there is material deterioration in Marble Re's risk-adjusted capitalization or significant downward movement in Marubeni's credit risk profile.

A.M. Best is a rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world.

The methodology used in determining these interactive ratings is Best's Credit Rating Methodology, which provides an explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process.

A.M. Best Asia-Pacific Limited is a subsidiary of A.M. Best Company.

A.M. Best Company is an insurance rating and information source.

More Information:

http://www.ambest.com/captive

http://www.ambest.com

Best's Credit Rating Methodology:

http://www.ambest.com/ratings/methodology

((Comments on this story may be sent to [email protected]))