AM Best Revises Outlooks to Positive for East Caribbean Reinsurance Company Limited

AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of East Caribbean Reinsurance Company Limited (ECRC) (Anguilla).

The Credit Ratings (ratings) reflect ECRC’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 positive outlooks reflect ECRC’s strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). While absolute capital and surplus remains modest, ECRC’s BCAR scores have consistently measured well at the strongest level for the last several years, showing the relative strength of its balance sheet given its lower levels of premium retention. The organization was materially impacted by Hurricane Maria in fiscal year 2018, which prompted it to significantly lower its retention level. Since then, ECRC has grown capital and surplus annually through favorable net earnings, despite occasional dividend payments to its parent entity, TDC Group Limited (TDC Group). The balance sheet strength assessment is further supported by strong liquidity measures and a conservative asset portfolio, which is primarily composed of cash and short-term investments. While the organization does have a high dependence on reinsurance, this risk is partially mitigated by the use of a high-quality panel of reinsurers with cash calls built into its reinsurance program. The potential upward rating movement is conditioned on further growth of absolute capital base, while maintaining the strongest level of risk-adjusted capitalization, as measured by BCAR.

ECRC’s operating performance is assessed as adequate. The company has reported favorable net earnings in each of the last five years due to a more conservative reinsurance structure and the absence of major catastrophic events. ECRC retrocedes most of the business it writes and retains only a modest amount of risk, which is reflected in its loss ratios. Additionally, gross premiums have grown steadily in recent years.

ECRC provides treaty and facultative reinsurance solutions for various lines of property and casualty coverage to TDC Group, and increasingly to other entities operating in the region. The organization aims to achieve growth within existing guidelines without increasing its net retained risk. While premiums have been diversifying geographically in recent years, they remain concentrated in St. Kitts and Nevis and Anguilla.

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