AM Best has upgraded the financial strength rating of Eureka-Re SCC (Eureka) from B++ (Good) to A- (Excellent) and the Long-Term Issuer Credit Rating from “bbb+” (Good) to “a-” (Excellent). The outlook for these ratings has been revised to stable from positive.
The rating upgrades are attributed to Eureka's growing capital base, supported by established and effective ERM practices that have helped maintain capital stability and steady results.
Founded in 2009 and based in Barbados, Eureka is a regional reinsurer focused on the Latin American market. The company primarily underwrites lower layers of facultative programs sourced through managing general agents. While its main source of premiums is Latin America, Eureka has expanded its operations internationally, investing in experienced personnel and systems.
The company's business profile is considered neutral, taking into account its geographic diversification and ability to manage risks. AM Best will continue to monitor the risks associated with this diversification and the company's performance in new markets.
Eureka's balance sheet strength is assessed as very strong by AM Best, with increased capital availability and quality resulting from positive net income, conservative risk-taking, and a policy of reinvesting earnings. The company has also implemented stringent risk modeling and adjusted its retentions based on past experiences, further enhancing its reinsurance program with high-quality reinsurers.
Its investment portfolio is designed to match insurance liabilities and aims to generate returns while supporting business growth. AM Best will continue to assess these investments and their impact on Eureka's risk-adjusted capitalization.
Eureka's operating performance is rated as adequate, with consistent profitability demonstrated in 2023, despite the occurrence of Hurricane Otis, which had no significant impact on the company's financial results or balance sheet. These outcomes reflect Eureka's ongoing enhancement of its ERM practices and adjustments in underwriting and retentions to adapt to changing market conditions.
AM Best notes that negative rating actions could occur if Eureka's risk-adjusted capitalization declines due to increased risk-taking in underwriting or investments. Conversely, positive rating actions could be considered in the medium term if there is a sustained positive trend in operating performance, supported by stable net results and high-quality underwriting.
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