AM Best Assigns Credit Ratings to Epsilon Reinsurance Company Ltd.

Business Wire

MEXICO CITY--(BUSINESS WIRE)--
AM Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” (Excellent) to Epsilon Reinsurance Company Ltd. (Epsilon Re) (St. Michael, Barbados). The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect Epsilon Re’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

Epsilon Re was incorporated in December 2020, and started operations in April 2021. The company originated as part of a Mexican business group with extensive experience in the government sector. Epsilon Re is owned by Panama-domiciled Bardigiano Corp., a pure holding company.

Since its inception, Epsilon Re has progressively consolidated its presence in Mexico’s reinsurance market with a business portfolio operating in its life and non-life segments with markets shares of 52% and 48% based on gross written premiums, respectively. Group life accounts for 51.5% of the company’s gross written premiums, followed by energy with 17.3%, accidents and health (1.8%), and the rest (29.4%) in other property/casualty lines. Geographically, 94.6% of premiums are sourced from Mexico, and the rest from 3 other countries. Since 2024, the company initiated its internationalization process, incorporating operations in Colombia and Dubai.

Epsilon Re’s business profile assessment is neutral. The company operates as a niche reinsurer, with a portfolio concentrated mostly in Mexican governmental entities. The company’s focus on risk management and technical analysis, with a turnaround in profitability reversing historical losses, offsets the limitations arising from its geographic and client concentration.

AM Best assesses Epsilon Re’s balance sheet strength at the very strong level supported by the positive bottom-line results that it has managed to achieve during its short track-record, as well as capital contributions provided by its shareholders. Epsilon Re is expected to maintain prudent underwriting practices, preserving its capital position. Conversely, there is the inherent execution risk for a start-up business.

The assessment on operating performance is adequate, reflecting a gradually stabilizing operation. Continued discipline in reserving, expense containment and risk selection will be necessary to establish sustained trends.

The stable outlooks reflect AM Best’s expectation that Epsilon Re will maintain its overall balance sheet assessment, supported by risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), while ongoing strategic initiatives will be executed with manageable deviations, and planned risk management as an essential part of that strategy.

Positive rating actions could take place if Epsilon Re is able to maintain its current level of risk-adjusted capitalization while improving its bottom-line results and profitability indicators to levels more in line with highly rated peers. Sustained deterioration in operating results or a significant weakening of Epsilon Re's risk-adjusted capitalization could trigger negative rating actions.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.