A.M. Best Affirms Ratings of Scotia Insurance (Barbados) Limited

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), the third-largest commercial bank in Canada by assets. 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 retrocedes the Canadian risks to unaffiliated reinsurers and accepts similar non-Canadian risks from those unaffiliated reinsurers. Scotia Re also participates at a modest exposure level in several property catastrophe insurance contracts.

The ratings of Scotia Re reflect its consistent growth in premiums and earnings, its solid risk-adjusted capitalization, the geographic diversification of the company’s insurance risks and liquid investment portfolio. The investment portfolio is largely made up of current and short-term deposits with related parties. Given the geographic diversification of Scotiabank, A.M. Best believes that Scotia Re is well positioned to profitably grow premium volume over the long term.

Partially offsetting these strengths is Scotia Re’s dependence for growth upon the rate of new consumer loan originations in Canada and other local economies where Scotiabank operates, as well as the potential underwriting volatility from property catastrophe exposure. While recognizing the solid market position of Scotiabank, A.M. Best expects that decreases in consumer loan activity could adversely affect the associated opportunities to sell credit insurance. In addition, the concentration in short-term investments has resulted in lower investment income reflecting the continued low interest rate environment.

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