AM Best has affirmed the financial strength rating of B++ (Good) and the long-term issuer credit rating of “bbb+” (Good) of Bermuda-domiciled Black Gold Re Limited (BGRe). The outlook for the ratings is stable.
BGRe is a captive reinsurer owned by Ecopetrol S.A., a Colombia-based integrated energy company that is 88% owned by the Colombian government.
The captive has access to a wide scope of insured risks given the relevance of Ecopetrol to the oil and gas industry in the Americas, but the company’s underwriting risks are concentrated in Colombia.
BGRe’s enterprise risk management is well-integrated within Ecopetrol and is important to the group as a risk management tool.
The company has low net underwriting leverage, creating dependence on reinsurance, but these associated risks are mitigated partly by a diversified mix of well-rated reinsurers.
The ratings of BGRe reflects its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The ratings also recognise the importance of the company within Ecopetrol’s strategy.
BGRe’s very strong level of balance sheet strength reflects its capital management strategy and ability to build up capital.
AM Best expects BGRe to maintain a capital buffer as it continues to adjust its risk appetite to the reinsurance needs of its parent company, and overall reinsurance market conditions.
AM Best said BGRe’s operating performance is characterised by profitable technical results backed by well-established underwriting principles and considerable revenue from ceding commissions.
Over the past few years, the company has complemented its net profit with investment results, but dependence on this revenue is low.
AM Best expects the company to continue backing its results with its technical performance.
The stable outlook reflect AM Best’s expectation that BGRe will continue to adjust its risk appetite and tolerance levels that support its parent company’s needs in terms of volume of capital and underwriting capabilities.
“Positive rating actions could result if there is a sustained favourable trend in operating performance as the company’s strategy continues to adapt to the reinsurance market,” AM Best said.
“Negative rating actions could occur if business flow is limited by any change in its holding company or if the financial situation of the parent company is compromised by any socio-political or economic event.”