AM Best Puts Ratings of Brazil Reinsurer IRB Under Review on Governance Issues

March 9, 2020

AM Best has placed under review with negative implications the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of IRB Brasil Resseguros S.A.

The rating actions follow the resignation of IRB’s CEO and CFO on March 4, 2020. Subsequently, IRB issued a press release stating that its Board of Directors appointed a new executive as CFO and interim CEO, said the ratings agency.

Adding additional uncertainty, IRB’s board of directors upheld the decision by its statutory board to initiate an investigation to identify the exact circumstances of the disclosure of information by IRB executives regarding its shareholder base.

(IRB management first confirmed last week that Berkshire Hathaway International Insurance Ltd. was an investor and had recently increased its stake. However, the company later said that Berkshire Hathaway is not an investor. Analysts later said criticized IRB management, expressing concern about the company’s governance.)

AM Best said it is concerned about the effectiveness of IRB’s governance and believes the company will remain challenged while replacing two key executives.

A rating factor that could lead AM Best to remove the under review with negative implications status is the successful management transition while maintaining the company’s existing levels of risk-adjusted capitalization and operating performance as well as any potential impact on the company’s business profile.

A rating factor that could lead AM Best to remove the under review status and downgrade IRB’s ratings is a material deterioration of IRB’s risk-adjusted capitalization, operating performance, business profile, or enterprise risk management caused by any management change at the company.

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