AM Best Affirms Credit Ratings of Maxseguros EPM Ltd.

AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Maxseguros EPM Ltd. (Maxseguros) (Bermuda). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Maxseguros’ balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The ratings also reflect Maxseguros’ risk-adjusted capitalization being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), and supported by a comprehensive and adequate reinsurance program, coupled with a conservative investment policy and limited premium risk exposure. The ratings recognize the important role of the company within its corporate parent structure, Empresas Públicas de Medellín E.S.P. (EPM), which is owned by the Colombian municipality of Medellín. EPM is the largest power generation and multiutility company in Colombia. Maxseguros is a single-parent captive insurer wholly owned by EPM and provides reinsurance to the EPM group, covering property damage and business interruption, commercial crime, cyber risk, directors and officers, errors and omissions and general liability exposures.

These positive rating factors are offset partially by EPM’s substantial financial leverage and Maxseguros’ limited business and market scope, which is mitigated somewhat by Maxseguros’ stable results, favorable geographic spread of risk and its history of growing its surplus position. Additionally, while Maxseguros depends on reinsurance, the company’s well-set underwriting and technical capabilities have allowed it to position itself as a key participant within EPM’s reinsurance panel.

The stable outlooks reflect Maxseguros’ role within EPM's strategy, which results in financial flexibility for its balance sheet strength, as well as operating synergies that support profitable growth. This has been proven by Maxseguros’ capacity to adjust its retentions, while maintaining consistent operating performance without any adverse effect on its capitalization. AM Best has a favorable view of Maxseguros’ overall profile within EPM’s structure; however, EPM’s credit profile and financial leverage remain key factors for future reviews of Maxseguros.

Positive rating actions could take place if Maxseguros' operating performance reflects a consistent, upward trend of profitable underwriting and investment results that improve its metrics to compare favorably with a strong assessment level. Negative rating actions could occur if Maxseguros’ operating performance deteriorates due to increased retentions, to a point that it is no longer supportive of the ratings and causes erosion in the company’s capital base. Negative rating actions also could arise if there is a material shift in the risk profile or role within EPM, which undermines the stability and profitability of Maxseguros, including increased activity in cash outflows to the parent.

AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

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 Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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