AM Best Affirms Credit Ratings of Scotia Insurance (Barbados) Limited
AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of "a+" (Excellent) of Scotia Insurance (Barbados) Limited (Scotia Insurance) (Barbados). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Scotia Insurance's balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
Scotia Insurance is primarily a life reinsurer that ultimately is owned by The Bank of Nova Scotia (Scotiabank). Scotia Insurance principally reinsurers credit insurance policies underwritten by major third-party life insurance carriers on consumer loans originated by Scotiabank's retail operations throughout Canada. The company has a long history of favorable underwriting results that have continued through 2020 despite challenges brought on from operating in the COVID-19 pandemic environment. The company is bolstered further by a favorable risk-adjusted capitalization and an investment portfolio that provides the entity with substantial liquidity due to its short duration.
These strengths are offset partially by Scotia Insurance's dependence on lending product originations within Canada, which were hindered by the COVID-19 pandemic. Coupled with a slowing of creditor insurance cross-sell on loans in recent years, this is expected to further the decline in premium levels in the near term. Furthermore, AM Best notes that despite the company managing capital to specific interna targets, which has kept absolute capitalization levels largely flat, Scotia Insurance could recapitalize in a stress scenario by adjusting its shareholder dividend payout.
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