AM Best Affirms Credit Ratings of Nova Casiopea Re S.A.

AMSTERDAM–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Nova Casiopea Re S.A. (NCRe) (Luxembourg). The outlook of these Credit Ratings (ratings) is stable.

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

NCRe is a pure captive reinsurer of Telefónica, S.A. (Telefónica), a Spanish multinational broadband and telecommunications provider with operations in Europe, as well as North, Central and South America. NCRe began operations in 2017, replacing Casiopea Re S.A. (CRe) as Telefónica’s main reinsurance captive. Concurrently, NCRe assumed the run-off liabilities of CRe. NCRe is dependent on Telefónica for its business; as such, while the company’s operations are diverse by line of business and geography, premium volumes remain constrained by Telefónica’s operations and strategic decisions.

NCRe’s balance sheet strength assessment is underpinned by the strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). The assessment is supported by NCRe’s conservative, appropriate and liquid investment portfolio, as well as capital buffers in the form of equalisation reserves. A partially offsetting factor is the company’s elevated exposure to natural catastrophe risk, which has the potential to introduce volatility to capitalisation levels.

NCRe’s operating performance assessment reflects AM Best’s expectation that NCRe’s prospective earnings will mirror the track record of the captive’s predecessor (CRe), which generated healthy albeit fluctuating returns. In 2019, NCRe generated a pre-tax profit of EUR 10.4 million, with a higher loss ratio of 59.0%, compared to 41.7% (2018), with last year being impacted by two large claims related to Chile’s civil unrest and protests. As of year-end 2019, the captive’s combined ratio was 81.3%, below CRe’s historic five-year weighted average of 85.4% (2012-2016).

The announcement of Telefónica’s new business model in the fourth quarter of 2019 has not affected the captive’s performance. AM Best notes that potential spin-offs of Telefónica’s major businesses in Latin America will likely impact the captive’s risk exposure.

AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

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 media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

Giannina Carbajal Ortiz
Financial Analyst
+31 30 308 5428
giannina.carbajal@ambest.com

Angela Yeo
Senior Director, Analytics
+31 20 308 5421
angela.yeo@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Communications
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

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