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16th of May 2012

Costa Rican government’s captive rated

Vicky Beckett 25/01/2012

Costa Rican captive, Instituto Nacional de Seguros, (The National Insurance Institute) has received a financial strength rating of A- (excellent) and issuer credit rating of ‘a-’.
 
AM Best said the outlook assigned to both ratings is stable.
 
The company is an autonomous institution in responsibility of the Costa Rican insurance monopoly in that country, parented by the Costa Rican government.
 
Instituto Nacional de Seguros (INS) showed robust capitalisation and liquidity position, a varied operating strategy.
 
The rating reflects its position as the main insurer in Costa Rica and favourable operating profitability.
 
AM Best considered the explicit support INS receives from the Costa Rican government, its parent.
 
INS proved to have a strong reinsurance program with esteemed international reinsurers.
 
Counteracting these positive features was INS’ relatively high loss and underwriting expense ratios compared to other insurers in the region.
 
Additionally, INS’ investment portfolio is heavily concentrated in government and bank issued securities.
 
However, the portfolio contains high credit quality securities and generates significant income.
 
The stable outlook is based on the expectation of sustained strong capitalisation and operating performance.
 
INS provides coverage for life insurance lines, health insurance, automobile, property and casualty (P&C), surety bonds and compulsory insurance, including compulsory workers’ compensation, auto compulsory insurance and comprehensive crop insurance for the local market.
 
P&C lines account for most of the written premiums.
 
The company is sanctioned to write 160 products by the Superintendencia General de Seguros as of year-end 2010.
 
This rating could be improved with enhanced underwriting performance, reduced overall net exposure and diversification of its investments.
 
However, it could also be downgraded or receive a negative outlook with a material loss of capital from either claims or investments, a reduced level of capital that does not support the ratings or an increase in net retention.
 
The INS is over 80 years old, and is obliged to meet the insurance needs of its customers.
 
The captive sells insurance and has previously managed the fire department, health services and works in a network of medical facilities throughout Costa Rica.

Tags: AM Best, Costa Rica, Government, INS, Life insurance, Medial, National insurance institute

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