AM Best faces scrutiny over new criteria for rating captives and risk transfer entities

In the United States, on January 10, 2025, AM Best announced it has affirmed various credit ratings for RGA Reinsurance Company and its subsidiaries. This includes a Financial Strength Rating (FSR) of A+ and Long-Term Issuer Credit Ratings (Long-Term ICRs) of “aa-” for several entities under the Reinsurance Group of America, Incorporated umbrella. The companies include RGA Reinsurance Company based in Chesterfield, Missouri, and others located in Bermuda and Canada. The affirmed ratings are a reflection of RGA's strong balance sheet and overall performance in the industry. AM Best highlighted several factors contributing to these ratings, including RGA's robust capital position, which has been consistently at the highest level according to the Best's Capital Adequacy Ratio (BCAR). Moreover, the reinsurance company boasts an impressive investment portfolio that has shown resilience with minimal impairments over recent years. RGA’s market presence is significant, particularly in the United States, Canada, Europe, and Asia, with almost half of its revenue generated from international activities. This diversification aligns with the steady growth in overall premiums reported by the company, driven by advancements across various geographical regions. Despite the favorable rating factors, AM Best noted concerns regarding earnings volatility, particularly in the U.S. individual mortality segment, which has faced adverse effects due to the COVID-19 pandemic. The stable outlook of the ratings indicates that the agency sees continued strength in RGA’s operational approach, highlighting the need for effective risk management practices in uncertain market conditions.