22 September 2022Reinsurance

AM Best affirms Dorinco Re ratings

AM Best has affirmed the financial strength rating of A and the long-term issuer credit rating of “a” of Dorinco Reinsurance Company, the captive reinsurance company of The Dow Chemical Company (Dow).

The outlook of these credit ratings is stable.

According to AM Best the ratings reflect Dorinco’s balance sheet strength, which the rating agency assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. Dorinco is a wholly owned subsidiary of Liana, which is ultimately a wholly owned subsidiary of Dow.

Dorinco’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), is assessed at the strongest level. The balance sheet strength also considers the company’s track record of overall positive reserve development, conservative investment strategy, good liquidity profile, and the enhanced financial flexibility provided by its ultimate parent, Dow.

The ratings also acknowledge Dorinco’s operating performance, which AM Best assess as adequate. Dorinco has a long track record of favourable operating performance, although its overall metrics have trended in an unfavourable direction in recent years. This is partially the result of redundant reserving, which may produce lower accident year combined ratios when the claims are ultimately settled.

Additionally, the ratings acknowledge Dorinco’s business profile, which AM Best assess as neutral. Dorinco issues direct property and liability insurance policies to Dow and certain related companies, and it participates in property and casualty reinsurance treaties covering Dow and related parties with other insurance companies. Approximately half of Dorinco’s premium is derived from reinsuring uncorrelated non-standard auto third-party business. The diversification this provides enhances Dorinco’s business profile.

Dorinco is a single-parent captive that is well-integrated within the Dow group and plays a fundamental role in managing the group’s risk-exposures. The company’s risk management capabilities are in line with its risk profile, said AM Best.