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Editorial Advisory Board

  • Professor Andrea M. Armani, University of Southern California
  • Ruti Ben-Shlomi, Ph.D., LightSolver
  • James Butler, Ph.D., Hamamatsu
  • Natalie Fardian-Melamed, Ph.D., Columbia University
  • Justin Sigley, Ph.D., AmeriCOM
  • Professor Birgit Stiller, Max Planck Institute for the Science of Light, and Leibniz University of Hannover
  • Professor Stephen Sweeney, University of Glasgow
  • Mohan Wang, Ph.D., University of Oxford
  • Professor Xuchen Wang, Harbin Engineering University
  • Professor Stefan Witte, Delft University of Technology

AM Best Affirms Credit Ratings of Colonnade Insurance S.A.

AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Colonnade Insurance S.A. (Colonnade) (Luxembourg), a member of the Fairfax Financial Holdings Limited (Fairfax) [TSX: FFH] group of companies. The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Colonnade’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

Colonnade’s balance sheet strength benefits from the explicit and implicit support provided by Fairfax. This support includes a track record of maintaining capital in the form of contributions and a legally binding guarantee and investment management services. Fairfax’s commitment to Colonnade’s strong balance sheet assessment was evident in multiple capital contributions over its operating history, though in recent years, capital generation has been through investment returns and profitable underwriting. Going forward, AM Best expects that Colonnade will continue to support its business needs through organic capital generation, as it implements growth plans and continues to invest in company infrastructure.

Colonnade’s premium volume grew rapidly from 2016 through 2018, its first three years under Fairfax ownership, as a result of the rollover of books of business previously written by the operations of QBE Insurance Group Limited and American International Group, Inc. The risk associated with Colonnade’s premium growth in its first few years of operation was moderated by Colonnade’s high retention level of management and the staff that wrote the business under the former owners. The pace of growth moderated in 2019 through the third quarter of 2021, and there is an expectation of more moderate growth going forward.

Colonnade’s adequate operating performance has been driven by its favorable loss performance, which was offset by the initial costs incurred in its developmental stage, with expenses outpacing premium. This performance was in line with the company’s business plan and it has steadily improved as startup costs have subsided. Colonnade generated an underwriting profit in 2019, and continued through 2020, albeit more modestly than the previous year due largely to the economic effects of the COVID-19 pandemic. As the more severe economic repercussions of the pandemic wore off in 2021, net income grew to 10.7 million euros at the end of the third quarter, an increase over 7.9 million euros at year-end 2020.

The company’s neutral business profile reflects its concentration in Central and Eastern Europe, with the three largest countriesPoland, Hungary and the Czech Republicrepresenting approximately 75% of the premium written. Concentration risk is offset by the dispersion of the remaining 25% of its business in three other central European countries and Colonnade’s diverse product offering.

AM Best considers the company’s risk management capability to be in line with its risk profile, and it is supported by the company’s focus on maintaining geographic and by-line diversity of its business, conservative reserving and per-risk reinsurance limits, supporting the assessment of appropriate. The company benefits from a comprehensive and well-documented ERM program and continues to grow more independent in its risk management functions as it matures, while continuing to benefit from the risk management expertise of its ultimate parent.

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 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 specializing 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 © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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