20 October 2018Analysis

Marubeni’s Micronesia captive gets Excellent rating

Ratings agency AM Best has affirmed the Financial Strength Rating of A- (Excellent) of Marble Re, the Micronesia-based single-parent captive of Japanese general trading company Marubeni.

Marble Re insures and reinsures the risks of affiliated and related companies within the Marubeni group.

The ratings reflect Marble Re’s balance sheet strength, which AM Best categorises as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

“Marble Re's strong balance sheet assessment mainly reflects its modest capital size, low underwriting leverage and conservative investment portfolio,” AM Best said. “Given the volume of risks that the company writes and retains, the capital required to support its current book of business is relatively modest.”

The captive’s underwriting results over the last five-year period have been consistently positive, contributing to an average combined ratio of under 60 percent. The volatility of the key operating metrics also has been relatively stable, owing largely to a conservative reinsurance program that helped reduce the volatility in its underwriting results.

Marble Re’s types of business written expose it to high-severity, low-frequency losses.

“Nevertheless, Marble Re has managed this risk through a prudent underwriting guideline and a robust reinsurance program with conservative retention levels and limits, including the presence of stop-loss covers for each line of business,” said AM Best.

The outlook of the ratings is stable, and reflects AM Best’s expectation that Marble Re’s operating performance will remain at a strong level, underpinned mainly by favorable claims experience and an expense ratio that should remain stable over time.

Negative rating actions could occur if there is a material increase in risk appetite, which could potentially undermine Marble Re’s profitability and capitalisation - or if there is a significant deterioration in Marubeni’s credit profile.