2013-12-18 21:00:04 -
A.M. Best Co. has affirmed the financial strength rating of A-(Excellent) and issuer credit rating of “a-” of Instituto Nacional de Seguros (INS) (San Jose, Costa Rica). The outlook for both ratings is stable.
The ratings reflect INS’ strong capitalization and liquidity position, diversified operating strategy, its position as the main insurer in Costa Rica and favorable operating profitability. The ratings also consider the explicit support INS receives from the Government of Costa Rica, as stated in the Insurance Law of 2008. This support, however, only guarantees insurance operations in the country. Also inuring to the ratings is INS' sound reinsurance program with highly rated international reinsurers, which provides adequate protection to variations in claim severity and catastrophic events.
These strengths are
partially offset by the company’s relatively high loss and underwriting expense ratios compared to other insurers in the region. Additionally, INS' investment portfolio is heavily concentrated in government and bank-issued securities. Nonetheless, the portfolio is composed of high credit quality securities and generates significant income for INS. The rating outlook is based on the expectation of sustained strong capitalization and operating performance.
INS underwrites life insurance lines, health insurance, automobile, property and casualty, surety bonds and compulsory insurance, which include compulsory workers' compensation, auto compulsory insurance and comprehensive crop insurance for the local market. Property and casualty lines account for approximately 48% of written premiums; compulsory lines account for approximately 34% of the total; and life and health lines account for approximately 18%. The company is authorized to write over 190 products by the Superintendencia General de Seguros (SUGESE).
INS is the largest insurer in Costa Rica with 89% market share as of September 2013, and it has expansive distribution channels and local market expertise. The company's operations are concentrated in Costa Rica, which makes the company vulnerable to regulatory, economic and political risks and market volatility. Furthermore, the local market has become very competitive, and INS will be challenged to maintain its underwriting discipline and rate adequacy while generating consistent underwriting earnings.
While the outlook is stable, positive rating actions may result from material and sustained improvement in underwriting performance, reduced overall net exposure and diversification of the company's investments.
Rating drivers that could lead to a negative outlook or a downgrade are a material loss of capital from claims or investments, a significant deterioration in capital strength as measured by Best’s Capital Adequacy Ratio (BCAR), excessive expansion initiatives outside Costa Rica or an increase in net retention.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
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A.M. Best Co.Janet Hernandez, 908-439-2200, ext. 5767Senior
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