18 May 2015Actuarial & underwriting

Vale’s captive placed on negative outlook

Rating agency Moody’s has placed Barbados-based Monticello Insurance on negative watch and affirmed its Baa3 insurance financial strength (IFS) rating.

Monticello is the captive reinsurance subsidiary of Brazil-based Vale, a metal and mining company. The change in Monticello’s outlook follows the change in Vale’s rating outlook to negative.

The rating agency said the affirmation of Monticello’s rating is based primarily on the support provided by Vale and on Monticello's integration with the global risk management function of the group.

It added that an upgrade is unlikely, although a return to a stable outlook for Vale’s rating could lead to a restoration of a stable outlook for Monticello.

“Conversely, MIL's rating could be downgraded if: 1) Vale's rating is downgraded; 2) support from the group to the captive company is reduced; 3) the captive reinsurer begins to cover risks of external (i.e. non-Vale) entities or engages in non-reinsurance business; or 4) Barbados' sovereign rating (currently B3, negative outlook) is downgraded,” said the rating agency.