Moody’s Ratings assigns Marco Re with A3 IFSR and stable outlook

Credit ratings agency Moody’s Ratings has assigned an A3 insurance financial strength rating (IFSR) to Marco Re Limited, a Guernsey domiciled reinsurer focused on non-life run-off insurance portfolios, with a stable outlook.

Moody’s explained that the stable outlook reflects the expectation that the group will maintain its strong financial profile, balanced sources of earnings and cashflows, and demonstrate its ability to continue originating new run-off business whilst remaining within its risk appetite.

Marco Re is wholly owned by Marco Capital Holdings Ltd, which operates several platforms (including Marco Re and a Lloyd’s syndicate) to support its run-off business, which is augmented by fee-related earnings from PoloWorks, its division which provides insurance administration services to third parties.

According to Moody’s, Marco Re’s ratings reflect its core status within the broader Marco Capital group and the enhancement to its standalone credit profile that it derives from its integral role within the group.

Marco Re’s strategic importance to the Group is solidified by it being the Group’s largest insurance operation and its role as a reinsurer to other entities within the Group.

Moody’s goes on to explain that Marco Re’s rating reflects the parent group’s growing market position and franchise in the European run-off, or legacy market, moderate product risk driven by good diversification of reserves, and predominant focus on short-to-medium tailed lines, as well as a strong financial profile.

However, the strengths are partially offset by execution risk related to the group’s ability to sustainably originate new transactions whilst remaining within its risk appetite, and risks inherent to run-off insurers, including the lack of recurring new business flows to help offset the impact of unexpected deterioration in run-off reserves, if that were to occur, warns Moody’s.

The group’s strong and stable profitability is supported by its well-balanced sources of earnings and cashflows across its legacy business, administrative fee-based services business income and from its investments.

Moody’s also explains that the group has strong capital adequacy as it reported a Solvency II coverage ratio of 297% at year-end 2024, while its high-quality and relatively short-duration investment portfolio reduces its sensitivity to financial market risks.

Given its focus on run-off insurance, organic capital generation is strong and supports its ability to originate meaningful amounts of new business from internally generated capital, explained Moody’s.

Lastly, Marco Capital benefits from good access to additional capital through its main shareholder, Oaktree Capital Management, which Moody’s believes that the alignment of incentives between Marco Capital and Oaktree management is supportive of its good financial strategy and risk management. However, concentrated private ownership could make it more difficult to access fresh capital in the event of severe stress.

The assigned rating also incorporates Marco Re’s environmental, social and governance (ESG) considerations, which assesses Marco Re’s exposure to governance risks as low, reflected in a Governance Issuer Profile Score (IPS) of G-2. Marco Re benefits from the governance framework and structures of the broader Marco Capital group and its relatively conservative financial strategy and approach to risk management, explained Moody’s.

Moody’s will continue to monitor the company to determine whether to upgrade or downgrade the ratings and outlook.

Mark Elliott, CEO of Marco Re, said: “Moody’s rating of Marco Re provides independent third party validation of our business model and financial strength, which we consider to be core components of the value proposition we offer our clients. Marco Re is a reliable and sophisticated provider of P&C Legacy solutions and security and operational excellence are essential priorities for Marco Re management. We specialise in solving clients’ complex issues from a risk and/or capital management perspective.”

Simon Minshall, Marco Capital Group CEO, added: “Marco Capital takes a long-term approach to the Legacy market – we offer professionalism, creativity in devising attractive solutions for clients and financial security. In seeking a second rating for our business Marco Re, an essential part of the wider Marco Capital Group which includes service provider PoloWorks, we are demonstrating the financial strength of our balance sheet, operational and financial benefits from diverse income sources and validation of the security we offer our clients.”

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