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18th of May 2012

Colombian petrol captive rated

Matthew Broomfield 11/10/2011

The captive of Colombia’s largest petrol company has been assigned a first-time Baa3 insurance financial strength (IFS) by Moody's Investors Service. The rating outlook is stable.
 
Black Gold Re (BGRe) is the pure reinsurance captive of state-owned Ecopetrol, Colombia’s largest oil company.
 
The captive’s coverage includes protection for surety, sabotage and terrorism, cargo, material damage, business interruption. However, BGRe only retains risk for the surety and sabotage and terrorism lines as Ecopetrol and BGRe heavily utilise external reinsurers.
 
BGRe's rating is based primarily on the integration and support provided by its ultimate parent, in terms of risk management, given BGRe provides extensive property coverage to the group's operations in the Americas.
 
Moody's vice-president Diego Nemirovsky said, "Even though BGRe's current net exposure is relatively low, its retention policy could increase going forward, thus causing uncertainty about the company's capital adequacy". The rating agency also mentioned as important challenges BGRe's high exposure to reinsurers in the event of losses and dependency on pricing and coverage capacity in the global reinsurance markets, as well as its geographic concentration in Colombia and limited operating history.
 
Based in Hamilton, Bermuda, BGRe was established in 2006 as part of Ecopetrol's insurance risk management and risk-retention programme.
 
As of June 30, 2011, and based on non-audited financial statements, BGRe's total assets amounted to US$ 178m and its shareholders' equity to US$ 121m. The company's total gross premium for the year was US$ 33m, with a net profit of US$ 5m.

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