AM Best has affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” (Excellent) of Bermudian-based Maxseguros EPM Ltd, the single-parent captive insurer of the largest power generation and multi-utility company in Colombia.

The outlook of these credit ratings is stable.

The ratings reflect Maxseguros’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The ratings also reflect Maxseguros’s risk-adjusted capitalisation being at the strongest level, as measured by Best’s capital adequacy ratio, and supported by a comprehensive and adequate reinsurance programme, coupled with a conservative investment policy and limited premium risk exposure.

The ratings recognise the important role of the company within its corporate parent structure, Empresas Públicas de Medellín ESP, which is owned by the Colombian municipality of Medellín.

Maxseguros is a single-parent captive insurer wholly owned by EPM and provides reinsurance to the EPM group, covering property damage and business interruption, commercial crime, cyber-risk, directors and officers, errors and omissions and general liability exposures.

These positive rating factors are offset partially by EPM’s substantial financial leverage and Maxseguros’s limited business and market scope, which is mitigated somewhat by the company’s stable results, favourable geographic spread of risk and the history of Maxseguros’s growing surplus position, AM Best said.

Additionally, while Maxseguros depends on reinsurance, the company’s well-set underwriting and technical capabilities have allowed it to position itself as a key participant within EPM’s reinsurance panel.

The stable outlooks reflect Maxseguros’s role within EPM's strategy, which results in financial flexibility for its balance sheet strength, as well as operating synergies that support profitable growth.

AM Best said this had been proven by Maxseguros’s capacity to increase its retentions while maintaining consistent operating performance without any adverse effect on its capitalisation.

The ratings agency had a favourable view of Maxseguros’s overall profile within the ultimate parent’s structure; however, EPM’s credit profile and financial leverage remain key factors for future reviews of Maxseguros.

As the world’s captive insurance leader, the island is home to more than 700 captives.

Bermuda captives are 10.6 per cent of the total rated by AM Best, according to a recent report.