26 November 2015Actuarial & underwriting

AM Best affirms ratings of Nissan Global Re

AM Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of “a-” of Bermuda-based Nissan Global Reinsurance. T he outlook for both ratings is stable.

AM Best says the ratings reflect NGRe’s strong capitalidation, significantly improved underwriting performance over the past three years and its conservative underwriting strategy. According to the firm, ratings also consider NGRe’s role as a captive insurer for its parent, Nissan Motor Co, as well as its role within the profitable extended service contract and extended warranty business initiated by Nissan.

These factors are partially offset by the company’s concentration in asset-backed securities as well as its exposure to property-related catastrophes, according to AM Best.

“The company’s sizable investments in asset-backed securities account for nearly two times policyholders’ surplus and are composed of the higher risk automobile loans originated at Nissan’s financing company,” said the firm.

“These risks are mitigated by diversification and materiality of the underlying loans, as well as the substantial cash flows that are generated and make up a principal source of earnings for NGRe. NGRe’s catastrophe exposure stems from its property and marine cargo coverages written for its affiliates.”

NGRe is a single-parent captive of Nissan, one of the largest automakers in the world. In its role as a single-parent captive, NGRe provides Nissan with a host of insurance coverages in the US and abroad. Coverages include global property, global marine transport, global product and general liability, workers’ compensation and a global platform for extended service contract and extended warranty business.

As a member of the Nissan family of companies, NGRe benefits from the group's proprietary data warehouse, extensive risk management practices and loss control programs.

AM Best says it believes the ratings and outlook for NGRe are well-positioned at their current level, however, the company’s rating outlook could see positive movement if the company’s operating performance continues to improve and investment returns remain solid while maintaining a strong level of risk-adjusted capitalidation.

The ratings could be negatively impacted if NGRe’s risk-adjusted capitalisation and operating performance are adversely impacted by deterioration in its underwriting performance, increased frequency of catastrophe events or losses relating to its sizable asset-backed securities portfolio, said the firm.

Additionally, AM Best says the ratings could be negatively impacted by deterioration in its parent’s credit profile, significant changes to Nissan’s financial or market position or changes to NGRe’s current business profile and status as a single-parent captive.