Brazilian captive reinsurer rated ‘Excellent’ amid tough market conditions

Ratings agency AM Best has affirmed the financial strength rating of A- (Excellent) of J.Malucelli Re and J.Malucelli Seg, collectively referred to as J.Malucelli. The outlook is stable.

Domiciled in Brazil, J.Malucelli Re mainly acts as a captive reinsurer for J.Malucelli Seg, an organisation that has been writing surety directly for more than 20 years.

J.Malucelli writes the DPVAT (motor third-party liability) compulsory auto insurance as part of a pool of insurers. J.Malucelli benefits operationally from its minority shareholder, The Travelers Companies (ownership is 49.5 percent).

The ratings reflect J.Malucelli’s balance sheet strength, which AM Best categorises as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The positive rating factors are partially offset by J.Malucelli’s concentration risk as essentially a mono-line surety writer with business concentration in a single country.

J.Malucelli’s future plans to mitigate this risk include expansion into related lines of business and geographic diversification into other parts of Latin America.

AM Best suggested that Brazil's re/insurance market continues to be highly competitive, with home-grown and global re/insurers vying for market share.

"Despite Brazil’s economy showing initial signs that the economic recession is ending, companies are seeking international expansion while keeping an eye on the growth opportunities in the domestic insurance market," AM Best said. "Surety remains as one of the fastest-growing segments in the re/insurance industry in Brazil."