OLDWICK: AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” of BMO Reinsurance Limited (BMO Re) (Barbados). [the_ad id=”32940″]The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect BMO Re’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
BMO Re is an indirect wholly owned subsidiary of Bank of Montreal (BMO) and has four underwriting programs in place, including creditor and life reinsurance, property catastrophe and specialty property and casualty.
PpThe ratings of BMO Re reflect its stable net income trends, strong return on equity and strong liquidity.
In addition, BMO Re continues to maintain the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as low levels of credit risk within its investment portfolio, which is invested primarily in highly rated sovereigns, supranationals and corporate bonds.
While recognizing the strength of the ownership relationship with BMO, AM Best notes that volatility in Canada’s economy, along with the banking industry’s move to more digital transactions, losing face-to-face sales opportunities, could impact the creditor life insurance market and BMO Re’s ability to grow premium.
Moreover, BMO Re continues to have exposure to potential earnings volatility from its assumed property/casualty (P/C) risk, which saw some unfavorable results on the property catastrophe side in 2017 due to an active hurricane season and on the specialty P/C side in 2018.
AM Best notes that the company has risk limits in place to mitigate tail risk and remained highly profitable overall in both years, reflecting solid results in the core creditor reinsurance business line.