Rating Stability Maintained for BCIC Amidst Strategic Changes
AM Best Affirms Stability in BCIC's Credit Ratings
AM Best has affirmed the Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb” (Good) for British Caribbean Insurance Company Limited (BCIC). The outlook for these ratings remains stable, indicating confidence in BCIC's ability to meet its financial commitments.
Key Insights on Financial Strength
These credit ratings reflect BCIC’s significant balance sheet strength, which AM Best categorizes as very strong. This is complemented by solid operating performance and a robust framework for enterprise risk management. BCIC has displayed a marked improvement in its risk-adjusted capitalization recently, shown through its Best’s Capital Adequacy Ratio (BCAR). While there’s a noted susceptibility to tail risk, efforts to enhance risk-adjusted capitalization are evident.
Positive Trends in Capitalization
The favorable trend concerning risk-adjusted capitalization is driven by a decrease in premium risk and moderate capital growth. Surplus has increased steadily, thanks to prudent underwriting practices and a conservative investment strategy focused primarily on cash and fixed income assets.
Investments and Insurance Operations
British Caribbean Insurance Company operates within a competitive environment, leveraging reinsurance to stabilize earnings and protect surplus. Although the reliance on reinsurance is considerable, it is partly mitigated by engagements with high-quality reinsurance partners, which support BCIC’s financial resilience.
Operating Results and Performance Trends
Historically, BCIC has reported strong operating results, resulting from stable underwriting gains and a consistent generation of investment income. Comparatively, its investment returns are favorable when measured against peers in the Caribbean property and casualty sector. However, recent profitability has seen a downturn, primarily due to costs associated with transitioning to a new insurance system and expenses related to IFRS-17 accounting and reinsurance.
Future Expectations for Profitability
Looking ahead, AM Best anticipates that once the implementation of the new insurance system is completed, BCIC’s operating results will normalize. This anticipated return to form is expected to come as the company begins to reap benefits from operational efficiencies.
Growth in Premiums
Gross premiums have shown consistent growth over the past five years. In a strategic move, BCIC commenced a quota share agreement for its motor portfolios in Jamaica and Turks & Caicos, significantly affecting the net premiums written in both regions during the past two years. Given that much of its property business is also ceded, BCIC’s risk retention remains low, with ceding commission revenue constituting a significant part of total income.
Geographic Focus and Product Offerings
The company’s limited business profile arises largely from its concentration in the Jamaican market, which contributes over 90% of gross premiums written. BCIC holds a prominent position in Jamaica's insurance landscape, particularly within the property and motor insurance segments. Premiums also stem from its operations in Barbados and Turks & Caicos, reflecting a diverse yet concentrated portfolio.
Risk Management Framework
BCIC possesses a well-established risk management structure that embodies governance, principles, processes, and defined parameters aimed at mitigating risks effectively. AM Best evaluates BCIC's Enterprise Risk Management as suitably tailored to the scale and complexity of its business operations.
Frequently Asked Questions
What is the current rating of BCIC as affirmed by AM Best?
AM Best has affirmed a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb” (Good) for BCIC.
How does BCIC's risk-adjusted capitalization stand?
BCIC has demonstrated strong risk-adjusted capitalization, though it remains vulnerable to tail risk. Recent trends show improvement, supported by decreased premium risk and capital growth.
What impact has the new insurance system had on BCIC?
The new insurance system has affected BCIC's profitability due to implementation costs, but AM Best expects profitability to stabilize post-implementation.
Which markets does BCIC primarily serve?
BCIC primarily serves the Jamaican market, which accounts for over 90% of its gross premiums, alongside operations in Barbados and Turks & Caicos.
How does BCIC manage its reinsurance risk?
BCIC relies on reinsurance to mitigate earnings volatility and protect surplus, working with high-quality partners to offset the elevated reinsurance dependence risk.
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