No capitalisation impact from Paloma
Mr. Gayle |
International insurance rating company AM Best assigned a rating of A-(Excellent) to Sagicor General Insurance (Cayman) Ltd. last week.
The rating assignment came nearly four years after AM Best removed the financial strength rating from the company that was known as Cayman General Insurance at the time.
‘We’re particularly pleased about the timing of this action,’ said Michael Gayle, senior vice president of Sagicor General. ‘We had actually expected it some time ago.’
AM Best removed its rating from Cayman General on 30 December, 2004, – a little more than three months after Grand Cayman was hit by Hurricane Ivan – because it had not been supplied with loss information or a recapitalisation plan.
At the time, Cayman General was a subsidiary of Cayman National Corporation. In March 2005, CNC announced a plan to recapitalise the insurance company through a cash injection from its shareholders plus from a substantial sale of its shares.
In October 2005, the sale of a 51-per-cent-controlling interest of Cayman General was completed to the Barbados-based Sagicor Financial Corporation Group, through a Jamaica-based subsidiary.
The new company maintained the Cayman General name until 1 September, 2006, when it became Sagicor General Insurance (Cayman) Ltd.
In October 2007, Sagicor acquired Cayman National Corporation’s remaining 24 per cent interest in the company. Another 24 per cent interest is still owned by the Cayman Islands Government as part of the insurance settlement it reached with Cayman General over losses to government assets during Hurricane Ivan.
Even though Sagicor’s General Insurance (Cayman)’s parent company enjoyed an excellent rating by A.M Best, that rating did not transfer to its Cayman entity.
‘It’s a stand-alone entity,’ said Mr. Gayle. ‘AM Best rates each company on its own merit.’
Although it took longer than anticipated, Mr. Gayle said the timing of the rating boded well for the company, especially given the global economic situation.
‘It means our company and our financials can stand up to scrutiny at a time when AM Best is focusing their scrutiny more than ever before.’
AM Best stated in a press release last week that the rating action reflected Sagicor Cayman’s ‘solid risk adjusted capitalisation, diversified business profile and the enhanced financial flexibility provided by its parent, Sagicor Life Jamaica Limited, which, in turn, is owned by Barbados-domiciled Sagicor Financial Corporation, one of the largest financial institutions in the Caribbean.’
‘Since being acquired by Sagicor Life in 2005, the company’s underwriting results have been favourable, as retained earnings have enabled Sagicor Cayman to enhance risk-adjusted capitalisation to a level commensurate with its ratings.’
In evaluating Sagicor’s capitalisation, AM Best stated it also considered Sagicor Cayman’s modelled catastrophe exposure and its ability to withstand natural catastrophes.
Ironically, official notice of the rating assignment came just days after Hurricane Paloma caused extensive damage to Cayman Brac.
‘Sagicor has significant presence on the Sister Islands,’ Mr. Gayle said. ‘We probably have the largest portfolio [there].’
Even though it expects several hundred claims resulting from damage caused by Paloma in the Sister Islands, Mr. Gayle there would not be any capital impairment to the company.
‘Even though the losses are significant, they are well within the reinsurance protection,’ he said.
Mr. Gayle explained that Sagicor General, like other local insurers, increased reinsurance levels after the Hurricane Ivan experience.
Although Paloma settlements won’t require any kind of recapitalisation, Mr. Gayle acknowledged that Sagicor’s portion of the damage pay-outs would affect the company’s profits in that they would erase gains made earlier in the year.
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