AM Best has updated the outlook for East Caribbean Reinsurance Company Limited (ECRC), based in Anguilla, from stable to positive, reflecting the firm’s robust balance sheet strength, adequate operating performance, limited business profile, and suitable enterprise risk management.
Concurrently, AM Best has also affirmed ECRC’s financial strength rating of B+ (Good) and the long-term issuer credit rating of “bbb-” (Good).
The shift to a positive outlook is attributed to ECRC’s strong risk-adjusted capitalization, as indicated by Best’s Capital Adequacy Ratio (BCAR). Despite modest absolute capital and surplus levels, ECRC has consistently demonstrated a robust balance sheet, supported by its conservative approach to premium retention.
The company experienced a significant impact from Hurricane Maria in fiscal year 2018, which led to a substantial reduction in its retention level. Since then, ECRC has consistently increased its capital and surplus annually through favorable net earnings, even while making occasional dividend payments to its parent entity, TDC Group Limited (TDC Group).
Its balance sheet strength is also bolstered by strong liquidity measures and a conservative asset portfolio dominated by cash and short-term investments. ECRC’s reliance on reinsurance is notable, but this is partially offset by employing a high-quality panel of reinsurers and incorporating cash calls into its reinsurance program.
Potential upward movement in ratings, AM Best noted, is contingent upon further growth in its absolute capital base while maintaining the strongest level of risk-adjusted capitalization.
The operating performance of ECRC is considered adequate, with the company recording favorable net earnings over the past five years. This success is attributed to a more conservative reinsurance structure and the absence of major catastrophic events. ECRC predominantly retrocedes its written business, retaining a modest amount of risk, reflected in its loss ratios. Furthermore, gross premiums have exhibited steady growth in recent years.
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