KBRA affirms AeBe (ISA)'s rating
Ratings agency KBRA has affirmed the A- financial strength rating of Bermuda-based long-term re/insurer AeBe (ISA) with a stable outlook.
KBRA said the rating reflected AeBe’s seasoned management team, strong risk-based capitalization, solid liquidity profile, strong enterprise risk management framework and sound management of the company’s exposure to interest rate risk.
But it wartned that the new entrant to the life reinsurance sector faced stiff challenges from larger rivals and other new entrants to the burgeoning sector.
"KBRA believes that the ISAC framework provides AeBe with a robust corporate structure," the agency said. "At year-end-2023, AeBe’s Bermuda Solvency Capital Requirement coverage ratio was 567%. As AeBe continues to execute its business plan, KBRA expects this ratio to decrease but remain strong over the medium term."
It added: "AeBe benefits from an experienced management team with deep expertise in reinsurance, asset management, and the Bermuda market. AeBe has a robust formal enterprise risk management framework and KBRA expects AeBe’s risk management programme to evolve and mature as the company grows.
"As a reinsurer of asset intensive life and annuity liabilities, AeBe is exposed to interest rate risk that can cause spread compression or disintermediation depending on whether rates are falling or rising, respectively. KBRA believes that Agam Bermuda’s proprietary pALM platform provides AeBe with an integrated approach to analyze, price, and manage its business in real time across all levels of the company, thereby mitigating exposure to asset-liability mismatches."
However, it said due to its limited tenure in the market, AeBe’s earnings were currently dependent on a small number of transactions and while its management has a track record of building successful businesses as well as investing insurance company assets, KBRA believes that AeBe still faces execution risk.
"KBRA views AeBe’s business plan as conservative but notes that the asset intensive life and annuity reinsurance market is dominated by a few large competitors that benefit from scale and brand recognition as well as several newer entrants which may challenge AeBe’s ability to execute its business plan," KBRA said. "In addition, ongoing changes in local and international solvency regimes has fostered greater uncertainty in an increasingly complex regulatory landscape."
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