Rating agency AM Best this week downgraded the credit ratings of NCB Insurance Company Ltd (NCBIC) from “bb+” to “bb” reflecting its increased exposure to Government of Jamaica bonds against the backdrop of a depreciating local currency.
In a news release on Wednesday, AM Best reasoned that the rating action reflects NCBIC’s growing concentration in “single economy investment risk relative to capital levels compared with previous years.”
The rating agency added that majority of the company’s invested asset portfolio is comprised of Government of Jamaica bonds and that the country’s ranking at high levels of economic and financial system risk in turn constrains the potential of NCBIC’s future growth and lower risk-based capital.
“Given the concentration of invested assets held in Jamaican-related risks, growth in the company’s asset base will likely maintain these levels of risk adjusted asset exposures in the short to medium term.
AM Best’s overall assessment of the company’s balance sheet strength reflects this increasing asset risk profile despite regulatory capital levels that are well above regulatory minimums,” AM Best said.
Nonetheless, AM Best categorised the rating as adequate, highlighting NCBIC’s strong operating performance, neutral business profile and appropriate enterprise risk management.
NCBIC, in a statement to the Jamaica Observer yesterday, further defended its operations, noting that the assigned new long-term issuer credit rating of “bb” from “bb+”, poses no real threat to its performance.
“The outlook of these credit ratings is stable the report states; and adds that NCBIC has been able to demonstrate a history of strong and stable financial performance,” NCBIC’s Managing Director, Vernon James said.
“In addition to regulatory obligations regarding investment in Government of Jamaica securities, applicable to all locally registered insurance companies, we believe in supporting Jamaican dollar instruments as part of our commitment to building a better Jamaica,” he continued.
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