OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of B++ (Good) and issuer credit rating of “bbb” of Jamaica International Insurance Company Limited (JIIC) (Jamaica).
The revised outlook is based on JIIC’s continued underwriting losses, compounded by depressed investment income levels expected in the future, due to lower interest rates caused by the restructuring of the Jamaican bonds. JIIC’s investment income, which mitigated underwriting losses in the past, will be reduced going forward. Although JIIC’s management team has implemented strategies to improve underwriting results, A.M. Best is uncertain of the effectiveness of these strategies given the current challenges in the Jamaican insurance market.
Positive rating factors for JIIC are continued favorable capitalization and the financial flexibility as a result of the support and commitment of its parent, GraceKennedy Limited (GK Group), one of the leading business conglomerates in the region. GK Group is publicly traded on the Jamaican and Trinidadian stock exchanges.
Historically, JIIC reported consistent overall earnings as a result of its steady investment income, and this has enabled the company to consistently enhance its capital position. The company continues to maintain adequate risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR). As an integral member within the GK Group, JIIC enjoys strong parental support and commitment as evidenced by GK Group’s past capital contributions and its stated willingness to make additional funds available should the need arise.
Offsetting these positive rating factors is JIIC’s lack of geographic diversification, the continuing challenges in the Jamaican macroeconomic environment and the high cost of the company’s reinsurance program, due to its dependence on reinsurance for earnings and surplus protection from catastrophic events.
The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Understanding Universal BCAR”; “Natural Catastrophe Stress Test Methodology”; and “Assessing Country Risk.” Methodologies can be found at www.ambest.com/ratings/methodology.
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