AM Best has affirmed the financial strength rating of B+ (Good) and the long-term issuer credit rating of “bbb-” (Good) of Bermudian-based Orion Reinsurance Ltd.

The outlook of these credit ratings is stable.

The ratings reflect Orion Re’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The ratings also reflect the company’s strong risk-adjusted capitalisation as measured by Best’s capital adequacy ratio and the expertise of its management team.

Partially offsetting these positive rating factors, AM Best said, was the size of the company, which limited business diversification given the inherent concentration risk and the sensitivity to changes in its balance sheet structure, and the composition of Orion Re’s business portfolio.

Orion Re was founded in December 2004 and is licensed by the Bermuda Monetary Authority to act as a class III insurer without restrictions of any kind in its class.

The company’s main line of business is difference in conditions insurance but the company also retains specific life and non-life insurance business.

The agency said Orion Re had experience and recognition in the public services industry, as well as strategic alliances to support recognised Latin American reinsurers.

As of December 2022, AM Best said, Colombia represented 58 per cent of the company’s gross written premium, with the rest distributed in ten other countries, primarily throughout Latin America and the Caribbean.

Orion Re’s growth has fluctuated over the past five years, which is consistent with the size of the company.

AM Best said premium sufficiency had yet to be achieved. However, the company has maintained profitable bottom-line results during most years, which are expected to improve as the company’s business expansion plan takes place.

The results are supported by income from the rent-a-captive business, which has presented a consistent flow over the past years.

As of September 2023, the company posted $1.4 million in net income, which was on the higher end compared with historical trends, the agency said.

Orion Re’s loss ratio stood at 16.5 per cent, reflecting the management’s efforts to contain its claims.

The company’s risk-adjusted capitalisation, as measured by BCAR, has shown improvement since 2019, mainly due to a more conservative approach in the investment policies, which has reduced asset risk.

However, due to the company’s size and operation, the scores are sensitive to changes in its balance sheet structure and the composition of Orion Re’s business portfolio.

AM Best said negative rating actions could occur if premium growth, changes in the investment and/or underwriting risk profile, or deteriorating operating results reduced risk-adjusted capitalisation to a level that no longer supported the ratings.

Although unlikely, the agency added, positive rating actions could take place as a result of the strengthening of the company's balance sheet, supported by a successful development of the business strategy.