AM Best Assigns Credit Ratings to CRABI, S.A. de C.V.

AM Best has assigned a Financial Strength Rating of B (Fair), a Long-Term Issuer Credit Rating of “bb+”, and a Mexico National Scale Rating of “a+.MX” to CRABI, S.A. de C.V. (Crabi) (Mexico City, Mexico). The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect Crabi’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.

Limiting these ratings are the inherent risk of a start-up company implementing its business plan, and operating in an industry with high competition between large and specialized participants. Additionally, the fact that Crabi is dependent on external investors to increase its capital places stress on its balance sheet strength assessment.

Crabi is an insurtech startup company in Mexico that was authorized to underwrite property/casualty insurance in the auto line of business, beginning operations in May 2019. It is 99.9% owned by CRABI, Inc. (which exists with the only purpose to be an investment vehicle for Crabi), with the rest owned by Javier Orozco, the CEO.

Crabi’s business plan incorporates the use of big data to analyze individual driving behavior in order to offer personalized premiums specific to each driver’s risk profile, as well as algorithms that are used to set a policy’s risk by assessing personal driving behaviors and vehicle information. The company plans to develop its presence in Mexico through focusing on having a direct relationship with users, in contrast with the larger participants of the market. Geographically, as of year-end 2019, premiums are concentrated in Jalisco (47%), with the remaining distributed over three other states, including Mexico City.

The strong balance sheet strength assessment is underpinned by Crabi’s risk-adjusted capitalization standing at strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). To achieve its business targets, Crabi has been funded through capital rounds. Currently, it has raised the expected amounts each time; however, the uncertainty of future capital contributions to support the company’s operation puts pressure on its prospective BCAR scores.

The company’s balance sheet strength is reinforced by its reinsurance program placed with Swiss Reinsurance America Corporation, which adequately protects the company’s risk retention. Although the level of security provided by its reinsurance counterparty is excellent, AM Best considers the concentration in one reinsurer as a weakness.

The limited assessment of Crabi’s business profile reflects the currently challenging economic environment, which could hamper the company’s growth targets, and put pressure on the business volume required to adequately cover underwriting and administrative expenses. Crabi will remain susceptible to deviations in underwriting quality and its business strategy as it makes its way to achieve its objective premium volume.

Positive rating actions could take place if the company is able to achieve its commercial goals while remaining comfortably supported by its capital base. Negative rating actions could take place if Crabi experiences a deterioration in its risk-adjusted capitalization, or if the company fails to meet its growth and profitability objectives.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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