AM Best assigns credit ratings to AVLA Re Ltd.

AM Best assigns credit ratings to AVLA Re Ltd. | Insurance Business Asia

Reinsurance

AM Best assigns credit ratings to AVLA Re Ltd.

What have been the findings so far?

Reinsurance

By
Jonalyn Cueto

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. (Bermuda). The outlook for both ratings is stable.

The ratings considered AVLA Re’s balance sheet strength, which AM Best has classified as very strong, according to a news release. The company’s operating performance is assessed as adequate, supported by its enterprise risk management (ERM) framework. However, the company’s business profile is described as limited, reflecting its relatively small scale and competitive market environment.

AVLA Re, established in January 2022, operates as a Class 3A insurer in Bermuda. It reinsures business from subsidiaries of its parent company, AVLA Bermuda Holding Corp Ltd. (ABHC), which has operations in Chile, Peru, Mexico, and Brazil. Although AVLA Re currently reinsures only within the ABHC group, it plans to expand into third-party reinsurance over the medium to long term.

AM Best highlighted AVLA Re’s strong balance sheet, which has benefited from two capital infusions from ABHC since its inception. AM Best noted it will continue to monitor capital flows to ensure the company maintains its financial strength. As of June 2024, ABHC reported equity of $83 million.

The company’s operating performance, though still in its early stages, has been positive. AVLA Re has seen controlled premium growth and managed claims in line with expectations. Its second year of operations saw a profitable outcome, and AM Best will continue to evaluate its underwriting quality and overall performance as the company matures.

In terms of ERM, AVLA Re’s risk management practices are deemed appropriate for its current operations, and it benefits from the support and infrastructure of its parent company. The relationship with ABHC also provides access to capital, operational synergies, and experienced management, which further bolster AVLA Re’s position.

The stable outlook indicates AM Best’s expectation that AVLA Re will meet its strategic objectives, maintaining strong capital levels and adequate operational performance. However, the agency noted that negative rating actions could result if the company’s capital base weakens or if its role within the broader ABHC group diminishes. Positive rating actions are not anticipated in the near term, but long-term improvements in operating results and capital strength could lead to an upgrade.

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