A.M. Best Co. has downgraded the financial strength rating to A- (Excellent) from A (Excellent) and the issuer credit rating to “a-” from “a” for the reinsurance subsidiaries of Inter-Ocean Holdings Ltd. (Inter-Ocean) (Bermuda).
The ratings apply to Inter-Ocean Reinsurance Company Ltd. (Bermuda) and Inter-Ocean Reinsurance (Ireland) Ltd. Additionally, A.M. Best has downgraded the issuer credit rating to “bbb-” from “bbb” of Inter-Ocean. All ratings have a negative outlook.
These rating downgrades are a result of the Feb. 17, 2005, rating action taken by A.M. Best on one of Inter-Ocean’s principal retrocessionaires, American Re-Insurance Company (Wilmington, Del.). American Re’s financial strength rating was downgraded to A (Excellent) from A+ (Superior).
Despite these actions, Inter-Ocean’s ratings remain at the Excellent level, reflecting its non-risk retaining operating structure and the support it receives through its strategic relationships with its sponsoring shareholders who are comprised of recognized leaders in the insurance and reinsurance industries.
Offsetting these strengths are the risk-adjusted capital position of the group, which has diminished in recent years as the credit worthiness of some its most active retrocessionaires has been weakened.
The negative rating outlook reflects A.M. Best’s concern that even at its current rating level, Inter-Ocean’s relatively modest level of shareholders’ equity will not be adequate to support further increases in its credit exposure or rating downgrades of its principal retrocessionaires.
Additionally, the outlook is reflective of the increased regulatory scrutiny that the finite reinsurance market is experiencing and the impact this may have on Inter-Ocean’s ability to generate deal flow. A.M. Best expects to complete its annual review of Inter-Ocean in the near term.
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