A.M. Best Co. has affirmed the financial strength rating of B++
(Good) and issuer credit rating of “bbb+” of La Colonial, S.A.
Compañia de Seguros (La Colonial) (Santo Domingo, Dominican
Republic). The outlook for both ratings is stable.
The ratings reflect La Colonial’s profitable net results and more than
adequate risk-based capitalization. La Colonial’s consistent levels of
positive investment income have resulted in historically favorable
earnings that have enabled the company to continue to increase its level
of surplus. La Colonial’s financial strength is further enhanced by its
comprehensive reinsurance program and strong liquidity and solvency
La Colonial has shown disciplined underwriting in a highly competitive
market, while its risk-based capitalization remains fully supportive of
its current ratings and outlook. La Colonial’s profitability is
complemented by consistent levels of investment income, which has
enabled it to steadily appreciate surplus while still providing La
Colonial with dividend payments.
Partially offsetting these positive rating factors is La Colonial’s
limited financial flexibility, geographic concentration of its business
exclusively in the Dominican Republic and losses stemming from its
property/casualty book of business. La Colonial’s business concentration
makes it vulnerable to regulatory, economic and political influence and
volatility. Moreover, La Colonial will remain challenged to increase its
market share while generating consistent earnings in a very competitive
and maturing market. Also, the frequency of catastrophic events in the
Caribbean presents a substantial level of risk exposure to La Colonial
as it formalizes its risk management program.
Potential positive rating triggers would include sustained improvement
in La Colonial’s underwriting results in conjunction with tangible
improvements in the Dominican Republic regulatory environment and other
country risk metrics. Possible negative rating triggers could include
deterioration in the company’s underwriting results, and consequently, a
decline in its risk-based capitalization.
A.M. Best remains the leading rating agency of alternative risk transfer
entities, with more than 200 such vehicles rated in the United States
and throughout the world.
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. Key criteria utilized include: “Risk
Management and the Rating Process for Insurance Companies”;
“Understanding Universal BCAR”; “Catastrophe Analysis in A.M. Best
Ratings”; “Rating Members of Insurance Groups”; and “Evaluating Country
Risk.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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