Fitch assigns rating to QBE Blue Ocean Re

Fitch Ratings has assigned Bermuda-based QBE Blue Ocean Re an Insurer Financial Strength (IFS) Rating of 'A+' (Strong). The outlook is stable.

Blue Ocean is the captive reinsurer for the North American operations of Australia-based QBE Insurance Group.

According to Fitch Blue Ocean's rating is aligned with the 'A+' (Strong) IFS Ratings of QBE's operating subsidiaries, which reflect the group's 'very strong' business profile, 'strong' capitalisation and leverage and 'strong' financial performance and earnings. The stable outlook reflects our outlook on QBE.

Fitch sees Blue Ocean as a core captive, as its mission and strategic goals are intricately tied to QBE group's risk-management strategy by helping the group manage risks and costs more efficiently. The vast majority of its business is derived from the QBE group, which has a reasonable financial propensity to support Blue Ocean's ongoing solvency and viability.

Blue Ocean was established in response to the introduction of the base erosion anti-abuse tax as part of the US Tax Reform Act in December 2017. The company provides reinsurance services to QBE's North American operations - a role earlier performed by QBE's subsidiary, Equator Reinsurances. QBE has transferred ownership of Equator Re from QBE Insurance Holdings Pty Limited to Blue Ocean. As a result, Blue Ocean's consolidated profile is similar to that of Equator Re pre 2018. Equator Re will continue to provide reinsurance cover to QBE's operations outside North America.

Equator Re's net assets dropped to $936 million in 2017, from $1.5 billion in 2016, due to catastrophe losses stemming from QBE's operations. We expect Blue Ocean's consolidated capital position to improve alongside better profitability, which is further supported by access to the group's contingent capital facility.