AM Best has affirmed the financial strength of Lion Reinsurance Company Limited (Lion Re).

Lion Re has been assigned an ‘A’ or Excellent Financial Strength Rating (FSR) and an ‘a’ or Excellent Long-Term Credit Rating (Long-Term ICR). With such credit ratings, AM Best said the reinsurer’s outlook is stable.

According to AM Best, Lion Re’s balance sheet is very strong. The reinsurer has demonstrated adequate operating performance, a limited portfolio and appropriate enterprise risk management.

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Lion Re is a subsidiary of ASSA Compañía Tenedora, SA (ASSA Tenedora) and is owned by financial services holding company Grupo ASSA, which is publicly traded on the Panama Stock Exchange. Lion Re, headquartered in Bermuda, assumes risks from ASSA Tenedora’s subsidiaries in property, automobile, liability, marine, group life (short-term), health and miscellaneous businesses.

AM Best also recognised the strategic role that the reinsurer seeks to play when it comes to the group’s overall regional strategy but noted that Lion Re’s commercial profile is limited by market access in contrast to other commercial reinsurers in the market.

Thanks to the Best Capital Adequacy Ratio (BCAR), the reinsurer’s capital base supports a risk-adjusted capital assessment at the strongest level. With Lion Re consolidating ASSA Tenedora’s operations in the Central America region by providing reinsurance capacity, the reinsurer strengthens its importance in the group’s strategy.

Meanwhile, Lion Re’s adequate level of operating performance is due to the Central American insurers it has tied up with, as well as its affiliation with ASSA Group, which has provided the reinsurer with synergies, operational efficiency and underwriting support, AM Best said.

While the reinsurer continually reviews its underwriting guidance to improve the performance of its business segments that have deviated from its targets, the reinsurer’s investment income, which is based on a conservative strategy, continues to support its results. However, AM Best said Lion Re is not relying on this when it comes to delivering positive net profit results.

A greater degree of perceived integration of Lion Re’s role in the group while maintaining guaranteed support from the parent could lead to more positive rating action. On the other hand, a material loss of capital that reduces its risk-adjusted capital to a level that does not support ratings or a decline in Lion Re’s strategic importance to the group could lead to a negative rating action.

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