AM Best comments on rating of Telefonica captive Nova Casiopea Re
AM Best has affirmed a financial strength rating of A- (Excellent) of Nova Casiopea Re (NCRe), the captive reinsurer of Telefonica, a Spanish multinational broadband and telecommunications provider with operations in Europe, Asia, and North, Central and South America.
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 began operations in 2017, replacing Casiopea Re as Telefonica’s main reinsurance captive. Concurrently, NCRe assumed the run-off liabilities of Casiopea Re. Over the course the first year of its operation, the captive’s management has successfully executed the transition and the renewal of business, reporting gross written premiums of €57 million.
NCRe is solely dependent on Telefonica for the generation of premium, as such, whilst diverse by line of business and geography, premium volumes will remain constrained to the operations of Telefoncia.
AM Best said NCRe’s operating performance assessment reflects its expectation that NCRe’s prospective earnings will mirror the track record of the captive’s predecessor (CRe), which generated healthy albeit fluctuating returns. NCRe generated a pre-tax profit of €5 million in its first year of operation (2017), with a combined ratio of 76.9 percent. For year-end 2018, AM Best expects the company to deliver a combined ratio below 85 percent.