MEXICO CITY–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A+
(Superior), the Long-Term Issuer Credit Rating of “aa-” and the Mexico
National Scale Rating of “aaa.MX” of Berkley International Fianzas
Mexico S.A. (BFM) (Mexico City, Mexico). The outlook of these Credit
Ratings (ratings) is stable.
BFM is a member of W. R. Berkley Insurance Group (Berkley Group), which
on a consolidated basis, has a balance sheet strength that AM Best
categorizes as strongest, as well as strong operating performance, a
favorable business profile and appropriate enterprise risk management
(ERM).
The ratings reflect BFM’s substantial reinsurance support from its group
through the Berkley Insurance Company. Additionally, the ratings factor
in BFM’s integration with its parent company, W. R. Berkley Corporation
(W. R. Berkley), in terms of underwriting, ERM and capital commitments.
Limiting the ratings is the inherent risk of a startup company
implementing its business plan and the potential for volatility in
Mexico’s economy during 2019.
BFM was formed in November 2016, and is the Mexico surety subsidiary of
W. R. Berkley. The company received regulatory approval for operations
in June 2017 and issued its first policy that same month. The company
plans to develop a regional presence in northwest Mexico, through a
predominant mix of administrative surety, and a lesser portion of credit
and judicial products strongly backed by a comprehensive reinsurance
contract with its parent company.
BFM’s solid risk-adjusted capitalization is derived from its strong
capital position in support of its premium growth during its first years
of operation, which is strengthened further by the comprehensive
reinsurance contract with its parent company. Furthermore, AM Best
recognizes W. R. Berkley’s commitment to its subsidiaries providing
additional capital fungibility to the Mexico operation.
As a recently formed company, BFM will have to produce sufficient volume
to compensate for its fixed costs, while posting adequate underwriting
performance on its retained premium. While the BFM management and
underwriting team have a successful track record, the business plan
implementation has to evolve for AM Best to evaluate the company’s
operating performance adequately.
While the company has an experienced team of underwriters, achieving an
adequate premium volume might prove more challenging than anticipated.
This is due to uncertainty with regard to the new federal government’s
spending on infrastructure, which could diminish and impact surety
sector growth in the coming years and potentially limit the company’s
growth prospects.
If positive rating actions are taken on the main operating subsidiaries
of the Berkley Group for substantial and sustained improvement in
operating performance results relative to their peers, BFM’s ratings
likely would move in tandem. Conversely, if negative rating actions are
taken on the Berkley Group as a result of a sustained deterioration in
the group’s underwriting or operating results, BFM’s ratings would
mirror those same actions. Negative rating action also could be driven
by accident year results or adverse development of prior years’ loss
reserves at the parent level, or result from a change in the financial
position of the group’s holding company that prompts the withdrawal of
capital from the group or causes an increase in financial leverage or
decline in interest coverage at the holding company that is not
supportive of the current ratings.
This press release relates to Credit Ratings that have been published
on AM Best’s website. For all rating information relating to the release
and pertinent disclosures, including details of the office responsible
for issuing each of the individual ratings referenced in this release,
please see AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
Best’s Credit Ratings. For information on the proper media
use of Best’s Credit Ratings and AM Best press releases, please view Guide
for Media – Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.
AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit www.ambest.com
for more information.
Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.
Contacts
Olga Rubo
Financial Analyst
+52 55 1102 2720,
ext. 134
[email protected]
Alfonso Novelo
Senior Director, Analytics
+52
55 1102 2720, ext. 107
[email protected]
Christopher Sharkey
Manager, Public Relations
+1
908 439 2200, ext. 5159
[email protected]
Jim Peavy
Director, Public Relations
+1 908
439 2200, ext. 5644
[email protected]
