SWBC Re assigned A- rating
Bermuda-based reinsurer SWBC Re has been assigned an A- financial strength rating by AM Best.
AM Best assigned the same rating to San Antonio-based SWBC Property and Casualty Insurance Company.
The ratings agency said SWBC PC was established in 2022 to underwrite general contractual liability policies directly, supporting debt cancellation programmes in response to growing demand over the past few years, and to eliminate its reliance on external fronting agreements.
“The rating assignments reflect AM Best’s expectation that based on SWBC PC’s business projections, the company will maintain a balance sheet strength assessment of very strong, supported by the projected risk-adjusted capitalisation at the strongest level throughout the five-year forecast period,” the agency said.
“AM Best expects initial capitalisation and retained earnings over the forecast period to support the company’s expected premium growth, but long-term capital is expected to be managed through the use of reinsurance with their affiliate, SWBC Re. Investment risk is low given a conservative investment portfolio, which consists of investment grade fixed income securities and cash equivalents established in support of developing short-tail liabilities.”
The ratings of SWBC PC reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
“The adequate operating performance and limited business profile assessments are based on SWBC PC’s forecast presented to AM Best,” the company said. “Initially, SWBC PC absorbed existing accounts sold through both their affiliated distribution channel, as well as select outside brokers. Their business plan indicates expected continued growth, leading to underwriting earnings generating historically favourable loss ratios.
“While the contractual liability programs tend to be considered low risk, SWBC PC was formed recently and operates in a single state, limiting the business profile assessment.”
It added: “The ratings of SWBC Re reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM.
“SWBC Re exhibits the strongest level of risk-adjusted capitalization, as measured by BCAR, and it is expected to remain at this level, supported by low-risk reserves, conservative investment portfolio and consistent profitability.
“The company has a strong history of underwriting profitability in the contractual liability insurance market, in addition to various other credit lines of business, which management plans to bring on to the balance sheet in the near- to mid-term. The business profile assessment is limited given low geographic diversification and concentration risk, mitigated by a strong senior management team with vast industry experience.
“SWBC Re has provided a detailed expansion plan, which projects significant growth in the near term. While much of this expansion includes affiliated accounts, some level of execution risk remains. AM Best will continue to monitor this expansion closely and respond if actual results materially differ from projections.”
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