AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Jacana Re Limited (Jacana Re) (Guernsey). Jacana Re is a subsidiary of BHL Holdings Limited (BHL), the non-operating holding company of the BHL group. The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Jacana Re’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management. In addition, the ratings consider, in the form of lift, Jacana Re’s strategic importance to its parent company, BHL, as the group’s internal reinsurer.
Jacana Re’s balance sheet strength is underpinned by its strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). In addition, the balance sheet strength assessment reflects the company’s conservative investment portfolio, which supports an excellent liquidity position, and the absence of retrocession dependence, as all the risks are retained fully. The assessment also incorporates the potential for volatility in Jacana Re’s risk-adjusted capitalisation given the company’s relatively small capital base.
The company has a track record of strong operating performance, evidenced by a five-year average (fiscal-years 2016-2020) combined ratio and return on equity of 87.6% and 20.2%, respectively. Jacana Re’s performance benefits from a strong focus on underwriting discipline across the underlying books of business. Investment income makes a small, albeit positive, contribution to overall earnings.
Jacana Re was established in Bermuda in March 2004 as an internal reinsurer of the BHL group and re-domiciled to Guernsey in 2013. The majority of the risks underwritten by Jacana Re stem from South Africa, with a smaller portion derived from Australia. The entity is used by BHL as a risk management tool, retaining 100% of risks ceded from related insurance companies of the BHL group and its ultimate shareholders. Given its role in the group, Jacana Re’s business profile is constrained somewhat by the operations and strategic decisions of the BHL group in terms of geographic diversification, premium volume and lines of business underwritten.
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