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, reflecting its core status within the broader Marco Capital group.
The rating also reflects Marco Re’s e enhancement to its standalone credit profile that it derives from its integral role within the Group.
Moody’s highlighted several key credit strengths supporting the A3 rating, including the Group’s growing market position and franchise in the European P&C run-off (or legacy) market, and the moderate product risk due to its good diversification of reserves and predominant focus on short-to-medium tailed lines.
It also highlighted the group’s strong financial profile including, strong profitability supported by diverse sources of earnings and cashflows, good asset quality as a result of its high quality and liquid investment portfolio, and good capital adequacy with strong organic capital generation capability.
While the rating is strong, Moody’s noted certain challenges, such as the execution risk related to the group’s ability to consistently originate new transactions while adhering to its risk appetite.
The inherent risks of the run-off business model were also mentioned, particularly the absence of recurring new business flows to offset unexpected reserved deterioration.
The company’s financial flexibility is also somewhat constrained by its single private owner and lack of access to a broader investor base, Moody’s noted.
According to the agency, the stable outlook anticipates that the group will continue to maintain its strong financial profile and balanced earnings streams while demonstrating its ability to originate new business.
A rating upgrade could occur with an increase in scale and further diversification of earnings, or if the group’s Solvency II ratio remains sustainably above 180%.
Conversely, a downgrade could be triggered by an inability to sustainably originate new business, a material deterioration in reserve adequacy, or if the Solvency II ratio falls below 50%.
Marco Capital is majority-owned by Oaktree Capital Management. The group benefits from an equity commitment of €500 million by Oaktree Capital Management, L.P. that will allow it to fund its growth strategy for the immediate future.
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