Content and data provided by various third parties and Fidelity - Terms of Use
Print.Print
Small font size A Larger text size A Largest text size A

AM Best Affirms Credit Ratings of Kot Insurance Company AG

BY Business Wire | CORPORATE | 10:08 AM EST

LONDON--(BUSINESS WIRE)-- AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of ?bbb? (Good) of Kot Insurance Company AG (Kot) (Switzerland). The outlook of these Credit Ratings (ratings) is stable. Kot is the captive reinsurer of Petroleos Mexicanos (PEMEX), the Mexican state-owned oil and gas company.

The ratings reflect Kot?s balance sheet strength, which AM Best assesses as very strong, its strong operating performance, neutral business profile and appropriate enterprise risk management. The ratings also reflect a rating drag due to the company?s association with PEMEX.

Kot?s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best?s Capital Adequacy Ratio (BCAR). AM Best expects Kot to maintain a buffer over the minimum requirement for the strongest BCAR assessment over the medium term; therefore, reflecting its strategy to maintain sufficient capital to absorb potential volatility stemming from its exposure to low frequency, high severity losses. A partially offsetting balance sheet factor is the captive?s reinsurance dependence, driven by the large policy limits it offers to PEMEX. However, the associated credit risk is mitigated partly by a diversified retrocession panel and long-standing relationships with reinsurers of sound credit quality.

Kot has a track record of strong operating performance, generating a five-year (2019-2023) weighted average return on equity ratio of 15.0%. Results over the cycle have been underpinned by good underwriting performance, albeit subject to volatility, as demonstrated by a significant loss related to an offshore platform fire, resulting in a combined ratio of 94.5% for 2023 (as calculated by AM Best). Nonetheless, the captive reported a healthy five-year (2019-2023) weighted average combined ratio of 53.4%. Prospectively, AM Best expects the captive?s underwriting performance to be favourable over the longer term, albeit subject to potential volatility given its high net line sizes relative to its premium base.

Kot remains well-integrated within PEMEX as its only reinsurance captive and is important to the group as a cost-effective risk management tool.

Kot?s financial strength is negatively affected by the weaker credit profile of PEMEX, which has deteriorated in recent years. This is partly mitigated by the robust reinsurance regulatory regime in Switzerland, with strict requirements for capital adequacy and corporate governance, which provides some comfort over Kot?s prospective financial strength and independence from its parent.

AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best?s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

This press release relates to Credit Ratings that have been published on AM Best?s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best?s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best?s Credit Ratings. For information on the proper use of Best?s Credit Ratings, Best?s Performance Assessments, Best?s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best?s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright ? 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Source: AM Best

More Fixed Income News

All Fixed Income News

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

© 1998 – 2014 FMR LLC.

All rights reserved.
fir_news_article