Moody’s settles captive fraud case
Black Gold Re, the captive insurance company of Colombia’s Ecopetrol, has had its outlook downgraded from stable to negative. Moody’s affirmed the captives financial strength rating of Baa3, however. The rating agency affirmed the captive’s insurance financial strength (IFS) rating of Baa3 but changed its outlook from stable to negative.
According to the rating agency, the IFS reflects the financial strength of Black Gold Re’s parent, which is the largest integrated oil and gas company in Colombia. It also noted Black Gold Re’s “adequate” capitalisation and profitability and consistent earnings with low volatility.
However, it added that “those strengths are tempered by a market position with a very limited size and scope of operations, with a low level of diversification and exposure to high severity losses which ultimately rely on its parent company, Ecopetrol, and its integration with the group’s risk management activities. Consequently, Ecopetrol’s credit profile is a critical component in the Company’s financial strength assessment”.
“Consequently, Ecopetrol’s credit profile is a critical component in the Company’s financial strength assessment,” its analysis states.
A rating downgrade could result from several factors, according to the agency: a downgrade on Ecopetrol’s rating; divestiture or a reduction in support from its parent; a significant increase in Black Gold Re’s net exposure without a corresponding increase in its capital base; or the captive assuming non-group related risk exposures.
“Given the negative outlook on the company’s rating, an upgrade is unlikely,” Moody’s concluded.
Black Gold Re, Moody's, Insurance Financial Strength (IFS), Insurance, Reinsurance, Bermuda