AM Best downgrades NCB Insurance credit rating

Company defends its support of J$ instruments

Friday, August 31, 2018

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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.

James noted that despite the rating, NCBIC's investment strategists continue to monitor and manage risks associated with its portfolio in an effort to give customers the best value.

Subject to the Company's Asset/Liability Management Framework and operating within the constraints of the Regulations, he expressed confidence in the level of diversification across the company's various portfolios.

NCBIC provides group life and creditor life products, sold through its banking parent, National Commercial Bank Jamaica Ltd. For the third consecutive year, NCBIC was awarded the Best Pension Fund, Caribbean 2017 by the prestigious World Finance Global Pension Funds Awards.

— Kareena Bennett

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