AM Best affirms MRE ratings
AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” (Good) of Ma’aden Re (MRE), a captive reinsurer of Saudi Arabian Mining Company (Ma’aden). The outlook of these ratings is stable.
The ratings reflect MRE’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, in the form of rating enhancement, MRE’s strategic importance to its parent, Ma’aden.
MRE’s strong balance sheet strength assessment is underpinned by robust risk-adjusted capitalisation, moderate underwriting exposure, low asset risk profile and the good credit quality of its retrocession programme. Partly offsetting to the balance sheet strength assessment is the captive’s high dependence on retrocession, particularly following the increase of its risk limit, which elevates credit risk under a stressed scenario.
AM Best said that MRE is a single-parent captive, domiciled in the Dubai International Financial Centre, established in November 2021. The captive underwrites Ma’aden’s whole property damage and business interruption reinsurance programme and is expected to expand into additional lines over the coming years. MRE’s risks are concentrated to Saudi Arabia, where the majority of its parent’s assets are located.
MRE generated its first profit in 2023, its second full year of operation, reporting a solid pre-tax profit of $13.6 million (2022: $-4.1 million). The captive’s 2023 profit was driven by strong technical profitability, which was the result of a benign loss year, and modest investment income. Performance contrasted with the first year of operation, in 2022, which was impacted materially by two large claims that exhausted its aggregate yearly limits and resulted in the combined ratio of 175.9%. MRE’s is projected to generate a profitable return in 2024 and over the planned period, remaining supportive of an adequate assessment.
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