AM Best has affirmed the financial strength rating of A- (excellent) and the long-term issuer credit rating of “a-” (excellent) of Luxembourg domiciled Nova Casiopea Re S.A. (NCRe).  The outlook for the ratings is stable. 

NCRe is a single parent captive owned by Telefónica, S.A., a multinational broadband and telecommunications provider, headquartered in Spain. 

According to Ci Datahub, NCRe was formed in 2011 andis managed by SRS. 

The captive is well entrenched in Telefonica’s risk management framework reflecting its strategic importance to the group as a cost-effective risk management tool.  

NCRe maintains a broad portfolio mix and benefits from Telefonica’s geographic diversification, but as a pure captive its business profile remains constrained to Telefonica’s operations and decisions.  

AM Best said that the ongoing spin-offs of Telefónica’s businesses in Latin America (except for Brazil) could impact the captive’s profile, shifting its natural catastrophe exposure, among other impacts. 

The ratings reflect NCRe’s 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. 

NCRe’s balance sheet strength assessment is underpinned by its strongest level of risk-adjusted capitalisation, on both a standard and catastrophe-stressed basis, as measured by AM Best’s capital adequacy ratio (BCAR), supported by capital buffers in the form of equalisation reserves. 

The assessment also reflects NCRe’s conservative and liquid investment portfolio.  

An offsetting factor is the company’s elevated exposure to natural catastrophe risk, which has the potential to introduce volatility to capitalisation levels. 

The adequate operating performance assessment reflects the captive’s good, albeit fluctuating underwriting results since inception. In 2024, NCRe generated a pre-tax profit of €21.7m compared with € 21.1m in 2023 supported by a robust underwriting performance and solid non-technical profits. 

NCRe’s combined ratio stood at 63.7% at year-end 2024 prospective performance is subject to potential volatility due to exposure to catastrophe events.