AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Orion Reinsurance (Bermuda) Ltd. (Orion Re) (Hamilton, Bermuda). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Orion Re’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
The ratings also reflect the company’s strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and the expertise of its management team. Partially offsetting these positive rating factors is the size of the company, which limits business diversification given the inherent concentration risk, and the sensitivity to changes in its balance sheet structure, and the composition of Orion Re’s business portfolio.
Orion Re was founded in December 2004 and is licensed by the Bermuda Monetary Authority to act as a class III insurer without restrictions of any kind in its class. Orion Re’s main line of business is difference in conditions insurance, but the company also retains specific life and non-life insurance business. Orion Re has experience and recognition in the public services industry, as well as strategic alliances to support recognized Latin American reinsurers.
As of December 2022, Colombia represented 58% of the company’s gross written premium, with the rest distributed in 10 other countries, primarily throughout Latin America and the Caribbean.
Orion Re’s growth has fluctuated over the past five years, which is consistent with the size of the company. Premium sufficiency has yet to be achieved; however, the company has maintained profitable bottom-line results during most years, which are expected to improve as the company’s business expansion plan takes place. The results also are supported by income from the Rent-a-Captive business, which has presented a consistent flow over the past years.
As of September 2023, the company posted USD 1.4 million in net income, which is on the higher end compared with historical trends. Orion Re’s loss ratio stood at 16.5%, reflecting the management’s efforts to contain its claims.
Orion Re’s risk-adjusted capitalization, as measured by BCAR, has shown improvement since 2019, mainly due to a more conservative approach in the investment policies, which has reduced asset risk. However, due to the company’s size and operation, the scores are sensitive to changes in its balance sheet structure, and the composition of Orion Re’s business portfolio.
Negative rating actions could occur if premium growth, changes in the investment and/or underwriting risk profile, or deteriorating operating results reduce risk-adjusted capitalization to a level that no longer supports the ratings. Although unlikely, positive rating actions could take place as a result of the strengthening of the company's balance sheet, supported by a successful development of the business strategy.
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Olga Rubo, FRM
Senior Financial Analyst
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