A.M. Best Affirms Ratings of Scotia Insurance (Barbados) Limited [Professional Services Close – Up]

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 to its credit reinsurance business, Scotia Re also accepts a moderate level of international property/casualty risks.

The rating affirmations reflect Scotia Re's adequate level of capitalization and geographically diversified revenue and positively trending operating earnings growth. 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 bank deposits with a bank affiliate, in addition to 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 degree, Latin America and the Caribbean. Premium growth could decline if consumer loan originations slow in any of these markets impacting Scotia Re's ability to maintain current levels of reinsurance activity. Declines in economic conditions in Europe also could impact the company's ability to retrocede assumed risks to its European counterparties. Scotia Re is exposed to potential earnings and capital volatility from its assumed property/casualty business.

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 a significant decline in the company's capitalization or business outlook, a decline in its operating performance, a change in the regulatory environment, which impacts its business model or negative rating actions at Scotiabank.

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: ambest.com/ratings/methodology.

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

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