AM Best Awards Ratings to Popular Re
AM Best has conferred a Financial Strength Rating of B++ (Good) alongside a Long-Term Issuer Credit Rating of “bbb” (Good) to the Puerto Rican reinsurer, Popular Re, maintaining a stable outlook. These ratings are indicative of AM Best’s evaluation of Popular Re’s robust balance sheet, adequate operating performance, constrained business profile, and its well-suited enterprise risk management (ERM) framework.
Nevertheless, the credit agency highlighted that the weaker credit profile of its ultimate parent company, Popular, Inc., exerts a negative influence on the ratings, reflected as a ‘drag’ in Popular Re’s evaluations.
Operational Insights and Strategy
Launched in 2022, Popular Re functions as the property/casualty reinsurer for Popular, Inc., the premier financial institution in Puerto Rico, with branches extending into the Virgin Islands and the US mainland. The reinsurer plays a significant role in Popular, Inc.’s reinsurance program, acting as both an insurer and reinsurer across multiple property/casualty lines, and is integral to the organization’s risk management strategy.
AM Best underscored Popular Re’s strong balance sheet, fortified by very strong risk-adjusted capitalization as evaluated by Best’s Capital Adequacy Ratio (BCAR), a conservative investment portfolio, and favorable liquidity metrics. The rating agency also acknowledged the adequacy of loss reserves, which are maintained at the actuary’s midpoint, despite recognizing the limited reserve history and the long-tail nature of certain lines.
Operating Performance and Business Profile
The company’s adequate operating performance is largely driven by investment income, resulting in modest after-tax measures. Although the average combined ratio has been higher than peers during its initial phase, AM Best forecasts underwriting profitability for Popular Re within the following year. Despite writing various financial and property lines for its parent company, Popular Re’s business profile is deemed limited due to its geographic concentration of risk.
In terms of enterprise risk management, Popular Re is assessed as having an appropriate framework that is fully integrated into Popular, Inc.’s comprehensive risk management strategy.
