AM Best has assigned a financial strength rating of A- (Excellent) and a long-term issuer credit rating of “a-” to Nova Casiopea Re (NCRe) based in Luxembourg. The outlook assigned to these credit ratings (ratings) is stable.
According to AM Best, the ratings reflect NCRe’s excellent projected risk-adjusted capitalisation, a risk management framework commensurate to its risk profile and the company’s experienced management team.
An offsetting rating factor is the inherent earnings volatility embedded in the business to be written by the company, AM Best said.
NCRe is a captive reinsurer of Telefonica, a Spanish multinational broadband and telecommunications provider with operations in Europe, Asia, and North, Central and South America.
NCRe will start underwriting in 2017 and will derive its business solely from Telefonica’s global operations. Consequently, Telefonica’s future strategic transactions could have a material impact on premium volumes.
“The captive’s risk-adjusted capitalisation is projected to be excellent, reflecting moderate underwriting leverage and a relatively low-risk investment profile. Due to the nature of business to be underwritten, claims experience is likely to be volatile,” said AM Best.
“However, volatility will be partly mitigated by a comprehensive retrocession programme for catastrophe exposure placed with a panel of financially strong reinsurers.
“NCRe will underwrite approximately €54 million of gross written premiums during 2017 as it replaces Telefonica’s other captive reinsurer, Casiopea Re, in the renewal of the conglomerate’s property and liability reinsurance contracts.”
In AM Best’s opinion, the proven track record of NCRe’s management team substantially reduces execution risk associated with the new captive. NCRe will implement a risk management framework commensurate to its risk profile and closely integrated with that of Telefonica.
Casiopea Re will be replaced by NCRe, a newly created captive of Telefonica, in the 2017 renewal of the conglomerate’s property and liability reinsurance contracts. Following the renewal of both contracts, Casiopea Re will be placed into runoff.
AM Best, Nova Casiopea Re, Europe, Telefonica, Global, Insurance, Reinsurance, Captive, Risk management, Catastrophe, Property, Casualty, Ratings