German construction captives get Excellent ratings

Ratings agency AM Best has affirmed the financial strength rating of A- (Excellent) of Builders Re and Builders Direct, both Luxembourg-based subsidiaries of German construction company HOCHTIEF, owned by Actividades de Construcción y Servicios (ACS).

The outlook of the ratings is stable, and the ratings reflect Builders Re’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.

Builders Re’s balance sheet strength is supported by its risk-adjusted capitalisation being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The ratings agency expects Builders Re’s risk-adjusted capitalisation to remain at a strongest level, supported by good internal capital generation.

AM Best noted that Builders Re has a track record of strong and stable operating performance, largely driven by robust underwriting results, as demonstrated by a three-year average combined ratio of 79.8 percent.

The propsective performance of Builders Re is subject to some volatility, mainly from exposure to potential aggregation of losses. This risk is partly mitigated by its purchasing of whole account quota share cover from financially strong reinsurers.

Builders Re’s business profile assessment reflects the company’s geographically concentrated portfolio of casualty risks that emanate from HOCHTIEF’s construction operations in North America. Builders Re also reinsures the business from HOCHTIEF’s smaller insurance company, Builders Direct.

"Builders Direct’s ratings primarily reflect its strategic importance to Builders Re as a source of business growth and diversification, as well as explicit support from Builders Re in the form of reinsurance protection," said AM Best. "Builders Direct was created in 2013 and provides insurance cover to the HOCHTIEF group, as well as to third-party entities with a focus on mutual companies."