Fitch Affirms Black Gold Re Ltd. at ‘BBB’; Outlook Negative

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed Black Gold Re LTD's (BGRe) 'BBB' Insurer Financial Strength (IFS) rating. The Rating Outlook is Negative.

KEY RATING DRIVERS

Keeping with Fitch's methodology for rating core captive reinsurance companies, BGRe's rating is in line with that of its parent, Ecopetrol S.A. Ecopetrol has a National Long-Term Local Currency Rating of 'AAA(col)' and an International Local Currency Rating of 'BBB'/Negative Outlook, aligned to Colombia's sovereign ratings.

The status of BGRe remains as a core captive reinsurance company to Ecopetrol is based on the operational and financial support of its parent to BGRe, and on the fact that 100% of the underwritten risks come from Grupo Empresarial Ecopetrol (GE). In addition, the strategy of the captive reinsurer (BGRe) is aligned with the risk management of GE. The economic value of this activity is reflected in savings in the assurance process to Ecopetrol.

BGRe is a captive reinsurer domiciled in Bermuda that only engages in reinsuring the risks of Ecopetrol and the subsidiaries in which its parent has controlling interest. BGRe works with almost all the subsidiaries of Ecopetrol, confirming that it is a major subsidiary of GE.

The main purpose of BGRe is still the cost optimization of risk transfer, provide value-added services and position itself as the captive of all subsidiaries of GE. As of September 2016, the captive recorded retained earnings of USD100.95 million, attributable to the positive internal generation of resources BGRe has had since inception, which in turn represents savings and benefits produced for GE.

BGRe employs the Ecopetrol treasury department for its investment portfolio management. In addition, Ecopetrol provides technical and operational support for BGRe's optimal performance through risk financing coordination. BGRE's capital has doubled in the last five years to USD180 million due to an internal generation of resources and a conservative policy of maintaining retained earnings.

RATING SENSITIVITIES

The Rating Outlook is Negative.

The Negative Outlook mirrors the outlook on BGRe's parent Ecopetrol, which mirrors the negative outlook on the Colombian sovereign rating. Negative changes to Ecopetrol's ratings or to its ability and willingness to provide support could result in a downgrade for BGRe.

In addition, the rating outlook could be revised to Stable if its parent rating outlook is revised to stable, contingent on changes to Colombia's sovereign rating outlook.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria

Insurance Rating Methodology (pub. 15 Sep 2016)

https://www.fitchratings.com/site/re/887191

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1016590

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1016590

Endorsement Policy

https://www.fitchratings.com/regulatory

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed.

The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers.

For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

View source version on businesswire.com: http://www.businesswire.com/news/home/20161215006357/en/

Fitch Ratings

Primary Analyst

Esin Celasun

Director

+ 5521-4503-2626

Fitch Ratings Brasil Ltda.

Praca XV de Novembro, 20 - 401 B,

Rio de Janeiro, RJ, Brazil

or

Secondary Analyst

Milena Carrizosa
Director

+57-1-326-9999 ext 1090

or

Committee Chairperson

Donald Thorpe
Senior Director

+1-312-606-2353

or

Media Relations:

Elizabeth Fogerty, +1-212-908-0526

elizabeth.fogerty@fitchratings.com

Source: Fitch Ratings