15 November 2022Reinsurance

AM Best affirms Junto ratings

AM Best has affirmed the financial strength rating of A- and the long-term issuer credit ratings (Long-Term ICR) of “a-” of Junto Resseguros (Junto Re) and Junto Seguros (Junto Seg).

The outlook of these credit ratings is stable. Both companies are domiciled in Brazil.

AM Best said that the ratings reflect Junto’s balance sheet strength, which it assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

Junto Re is classified as a local reinsurer in Brazil and mainly operates as a captive reinsurer for Junto Seg, an organisation that has been writing surety directly for more than two decades. Junto Seg is the market-facing company of the group and one of the leading surety writers in Brazil. The companies benefit operationally from its minority shareholder, Travelers Brazil Acquisition LLC (with a 49.5% ownership), which is ultimately owned by The Travelers Companies. These benefits include collaboration on ERM, employee development, retrocession placement, claims handling, business development and other operational functions.

After a large return of excess capital payment made to the parent companies, Junto continues to maintain modest underwriting leverage and strong liquidity metrics, with a comprehensive retrocession program that provides additional capacity and reduces the company’s overall exposure. Junto is well-positioned to benefit from growth opportunities in the segment, such as performance bonds.

Partially offsetting these positive rating factors, said AM Best, is Junto’s concentration risk as a monoline surety underwriter with business concentration in a single country. As a result, albeit not likely, restrictive regulatory changes could impair Junto’s ability to execute its strategy. Junto’s plans to mitigate this risk include expansion into related lines of business. Additionally, Junto’s exposure per principal increased significantly, enlarging reinsurance dependency and potentially limiting the company’s ability to continue to increase gross premium growth rates in the future.

According to AM Best Brazil’s surety re/insurance market continues to be highly competitive, with homegrown and global re/insurers vying for market share. With Brazil’s persistent economic volatility, and with meaningful future growth still uncertain, companies continue to seek international expansion while keeping an eye on opportunities in the re/insurance market. Surety has been one of the fastest-growing segments in the re/insurance industry in Brazil.