AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Instituto Nacional de Seguros (INS) (San Jose, Costa Rica). The outlook of these Credit Ratings (ratings) is stable.

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

INS’ risk-adjusted capitalization remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), and is supported by a comprehensive and adequate reinsurance program, solid operating performance and its position as the leading insurer in Costa Rica. INS’ business profile assessment considers the characteristics of Costa Rica’s market, derived from the country’s Insurance Law of 2008, and includes INS’ robust market share and the guarantee provided by Costa Rica’s government to support INS’ domestic obligations.

INS is Costa Rica’s largest insurer with a market share of 65%, as of December 2023. The company still dominates the compulsory workers’ compensation and mandatory auto insurance segments despite the market opening to other participants several years ago. INS’ compulsory premium segment represents 36% of its business portfolio, as of December 2023.

In 2023, Costa Rica’s market continued its recovery, after being affected by a slowdown during the previous years, as a result of the COVID-19 pandemic and an adverse fiscal situation. INS’ underwriting performance stayed in line with 2022, driven by an adequate loss ratio and operating efficiencies. The company has not relaxed its underwriting standards from the adjustments implemented in previous years, like the abandonment of poor-performing products in auto, personal property and group life.

INS’ return on equity declined to 2.6% from 3.3% at year-end 2023, mainly due to exchange rate losses. Investment income, based on the company’s conservative investment portfolio, still contributed to a positive bottom-line result of USD 58.7 million at year-end 2023, providing a solid growth for its capital base, despite market volatility.

AM Best expects INS to continue improving and consolidating its business by implementing its strategy progressively, which should offset increased competition in the voluntary segments. The company is in a good position to maintain its risk-adjusted capitalization at the strongest level, as measured by BCAR, due to its good profitability, appropriate ERM practices and adequate reinsurance with highly rated international reinsurers, which provides a buffer for variations in claim severity and catastrophe events.

Although unlikely, positive rating actions could take place as a result of the successful consolidation of INS’ business strategy in the medium term, supportive of its current level of risk-adjusted capitalization, as measured by BCAR. Negative rating actions could occur if technical results deteriorate or if there is a reduction in net income, given any kind of loss that significantly affects the company’s profitability or risk-adjusted capitalization to levels that are no longer supportive of its current ratings.

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