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A.M. Best puts Cooperativa de Seguros Multiples de Puerto Rico under review

By on October 2, 2018

SAN JUAN – Global insurance credit ratings and information services proivder A.M. Best has placed under review with negative implications the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” of San Juan-based life-insurance provider Cooperativa de Seguros Multiples de Puerto Rico (CSM), a nonprofit.

CSM and its wholly owned subsidiary, Real Legacy, collectively are known as Cooperativa Seguros Group.

A.M. Best said it changed the FSR to a Non-Rating Designation of E (Under Regulatory Supervision) from A- (Excellent) and the Long-Term ICR to “e” from “a-” of Real Legacy Assurance Co. (Real Legacy) of Guaynabo, Puerto Rico, following the Office of the Commissioner of Puerto Rico’s announcement Sept. 28, that it placed Real Legacy under regulatory supervision.

The credit rating action for CSM follows the company’s recently filed second quarter filings, which reported a “significant decline in policyholder surplus driven by adverse development on losses from Hurricane Maria of approximately $30 million. As a result of these increased losses, claims from Hurricane Maria subsequently exceeded the company’s available reinsurance protection.

“In addition, losses at the subsidiary level also exceeded the available reinsurance protection, resulting in a sizeable realized capital loss. The size of the additional catastrophe losses relative to amounts previously disclosed to A.M. Best drives further uncertainty regarding the effectiveness of CSM’s enterprise risk management program.

“While the company has a number of initiatives under consideration to improve capital, the ultimate effectiveness of these initiatives are uncertain. Accordingly, the ratings will remain under review pending A.M. Best’s analysis of CSM’s capital plans,” the rating company explained in its release.

Real Legacy was placed under regulatory supervision (Puerto Rico) largely driven by considerable development on hurricanes Irma and Maria losses. The losses significantly developed in the first half of 2018 by approximately $110 million, which exceeded the company’s reinsurance limits by approximately $70 million,” Best said. “Accordingly, as of June 30, 2018, the company’s policyholder surplus was negative $42 million.”

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