AM Best affirms Black Gold Re ratings

Black Gold Re (BGRe), a Bermuda-based captive reinsurer of Colombian energy company Ecopetrol, has had its B++ financial strength rating affirmed. The outlook is stable.

AM Best said the rating reflected the company's balance sheet strength, which AM Best assessed as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also recognised the importance of the company within Ecopetrol’s strategy. Ecopetrol is 88.49% owned by Colombia’s government.

BGRe’s very strong level of balance sheet strength reflects its capital management strategy and ability to build up capital, the agency said.

The company has low net underwriting leverage, creating dependence on reinsurance; however, these associated risks are mitigated partly by a diversified mix of well-rated reinsurers.

AM Best expects BGRe to maintain a capital buffer as it continues to adjust its risk appetite to the reinsurance needs of its parent company, as well as the overall reinsurance market conditions.

It said BGRe’s operating performance is characterised by profitable technical results backed by well-established underwriting principles and considerable revenue from ceding commissions. Over the past few years, the company has complemented its net profit with investment results; however, dependence on this revenue is low. AM Best expects the company to continue backing its results with its technical performance.

The stable outlooks reflect AM Best's expectation that BGRe will continue to adjust its risk appetite and tolerance levels that support its parent company’s needs in terms of volume of capital and underwriting capabilities.

Positive rating actions could result if there is a sustained favourable trend in operating performance as the company’s strategy continues to adapt to the reinsurance market, the company said. Negative rating actions could occur if business flow is limited by any change in its holding company or if the financial situation of the parent company is compromised by any sociopolitical or economic event.

Negative rating actions could also take place if the balance sheet strength of the company is further stressed by the materialisation of any risk exposure.

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