AM Best assigns ratings to AVLA Re, company plans to begin reinsuring third-parties

Ratings agency AM Best has assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb+” (Good) to AVLA Re Ltd. (AVLA Re) (Bermuda), with the outlook assigned to these ratings being stable.

The agency noted that the ratings of AVLA Re reflect its balance sheet strength, which AM Best assesses as very strong.

AM Best also cited the organisation’s adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

It’s important to highlight, that the company is ultimately owned by AVLA Bermuda Holding Corp Ltd. (ABHC), a financial holding company based in Bermuda, which is heavily engaged in insurance operations in Chile, Peru, Mexico and Brazil.

AVLA Re is considered a new company as it began its operations in January 2022, under a Class 3A insurer license in Bermuda.

In addition, AVLA Re currently reinsures business from other ABHC subsidiaries, in Chile, Peru, Mexico and Brazil. However, the company currently has plans in place for the medium to long term to reinsure premiums from third parties.

AM Best noted that the company’s balance sheet strength is considered very strong.

As well as this, AVLA Re has received two capital infusions from its holding company since its creation.

AM Best stated that it will monitor any capital flows to and from the company to continue assessing the strength of its balance sheet.

The agency also explained that the stable outlooks reflect their expectations that AVLA Re will meet its business objectives in terms of operating metrics and capitalisation.

However, AM Best added that negative rating actions could occur if AVLA Re’s capital base were to erode due to substantial capital base deterioration or sustained unfavorable operating results.

Additionally, negative rating actions could also potentially occur should AVLA Re’s importance to the group’s strategy lessens in AM Best’s opinion.

Lastly, the agency explained that positive rating actions are not likely to occur in the short to medium term, but in the long term, they could be driven by a steady, upward trend in operating results, which in turn, will strengthen its capital base.

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