5 April 2023Analysis

AM Best affirms Jacana Re ratings

AM Best has affirmed the financial strength rating of A and the long-term issuer credit rating of “a” of Jacana Re. Jacana Re is a subsidiary of BHL Holdings (BHL), a non-operating holding company. The outlook of these Credit Ratings (ratings) is stable.

According to AM Best the ratings reflect Jacana Re’s balance sheet strength, which it assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management. In addition, the ratings consider, in the form of lift, Jacana Re’s strategic importance to its parent company, BHL, as the group’s internal reinsurer.

Jacana Re’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which was at the strongest level at year-end 2022, as measured by Best’s Capital Adequacy Ratio (BCAR). The balance sheet strength assessment reflects the company’s conservative investment portfolio, which supports its excellent liquidity position, and the absence of retrocession dependence, as all risks are retained fully. In 2022, the company received a capital injection to support its growing exposure to catastrophe risk in Australia.

According to AM Best: “Jacana Re has a track record of strong operating performance, evidenced by a five-year (fiscal-years 2018-2022) weighted average combined ratio and weighted average return-on-equity ratio of 86.6% and 18.6%, respectively. Jacana Re’s performance reflects the company’s strong underwriting discipline across the underlying books of business that it reinsures. Investment income makes a small, albeit positive, contribution to overall earnings.”

Jacana Re was established in Bermuda in March 2004 as an internal reinsurer of the BHL group and re-domiciled to Guernsey in 2013. The majority of the risks underwritten by Jacana Re stem from South Africa, with a smaller portion derived from Australia. The entity is used by BHL as a risk management tool, retaining 100% of risks ceded from insurance companies of the BHL group and its ultimate shareholders. Jacana Re’s business profile assessment is constrained somewhat by the operations and strategic decisions of the BHL group in terms of geographic diversification, premium volume and lines of business underwritten.