A.M. Best has affirmed the financial strength rating of A
(Excellent) and the issuer credit rating of “a+” of Royal Bank of
Canada Insurance Company Ltd. (RBCICL) (Barbados). The outlook for
both ratings is stable.
RBCICL is a reinsurer that is ultimately owned by Royal Bank of
Canada (Toronto, Ontario), one of the largest full service banks in
Canada, as measured by assets. RBCICL primarily reinsures life/health
insurance risks from unaffiliated international reinsurers, as well as
credit reinsurance risks from European reinsurers. The company
participates as a treaty partner in life retrocession pools, trade
credit pools and annuity longevity reinsurance.
The rating affirmations reflect RBCICL’s diversified operating profile,
solid capitalization and strong liquidity position. RBCICL’s investment
portfolio is composed of cash and high credit quality sovereign,
corporate and supranational bonds. Profitability measures also continue
to be strong and have shown improvement in each of the past five years
analyzed.
While recognizing the solid market position of Royal Bank of Canada,
A.M. Best notes that premium growth depends upon the strength of the
global economy. Any potential decrease in consumer loan activity could
adversely impact the credit insurance market. A decline in economic
conditions in Europe could negatively impact RBCICL’s ability to develop
new counterparty treaties.
Positive rating actions are unlikely in the near to intermediate term.
Factors that could cause negative rating actions include a significant
decline in the company’s capitalization or business outlook, a decline
in operating performance that impacts its business model, or negative
rating actions at Royal Bank of Canada. Furthermore, the pending federal
budget to be introduced in the Canadian parliament, which may reduce
certain benefits on reinsurance, could result in negative rating
pressure.
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.
A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
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