A.M. Best Affirms Ratings of Scotia Insurance (Barbados) Limited

A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of “a+” of Scotia Insurance (Barbados) Limited (Scotia Re) (Barbados). The outlook for both ratings is stable.

Scotia Re is primarily a life reinsurer that is ultimately owned by The Bank of Nova Scotia (Scotiabank). Scotia Re principally reinsures credit insurance policies underwritten by third-party life insurance carriers on consumer loans originated by Canadian, Latin American and Caribbean retail branches of Scotiabank. Scotia Re then retrocedes the Canadian risks to unaffiliated reinsurers and accepts similar non-Canadian risks from those unaffiliated reinsurers. Scotia Re has stopped accepting moderate levels of catastrophe risks as it has done in the past and plans to exit that business segment during 2015.

The rating affirmations reflect Scotia Re’s adequate level of capitalization, geographically diversified revenue and positively trending operating earnings growth. Additionally, the ratings reflect Scotia Re’s enterprise risk management (ERM) framework, which is well integrated into its ultimate parent’s ERM risk process and its highly liquid investment portfolio that consists primarily of term bank deposits with a bank affiliate, in addition to other North American financial institutions.

These strengths are partially offset by Scotia Re’s dependence upon consumer loan originations within Canada, and to a lesser degree, Latin America and the Caribbean. Premium growth could decline if consumer loan originations slow in any of these markets, impacting Scotia Re’s ability to maintain current levels of reinsurance activity. Declines in economic conditions in Europe also could impact the company’s ability to retrocede assumed risks to its European counterparties.

Scotia Re is considered well positioned at its current rating level with positive rating actions unlikely in the near or intermediate term. Factors that may cause negative rating actions include a significant decline in the company’s capitalization or business outlook, a decline in its operating performance, other regulatory changes which could adversely impact the business model over the longer term, or negative rating actions at Scotiabank.

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.

Key insurance criteria reports utilized:

• Evaluating Non-Insurance Ultimate Parents
• Understanding Universal BCAR
• Risk Management and the Rating Process for Insurance Companies

This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best’s Ratings & Criteria Center.

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