Moody's upgrades Colombia's Confianza after acquisition by Swiss Re

Moody's has upgraded its insurance financial strength (IFS) rating for leading Colombian surety firm Confianza to reflect the company's position as a majority-owned subsidiary of Swiss Re's insurance division, Swiss Re Corporate Solutions (SRCS), the ratings agency said in a release.

SRCS received final regulatory approval to acquire Confianza in November last year.

Moody's upgraded Confianza's global local currency IFS to Baa2 from Baa3, due to the strong degree of implicit support it has from SRCS, which now has a 51% stake in the Colombian firm.

This support includes having senior SRCS executives on its board of directors, partial co-branding with the Swiss Re unit, operational and strategic integration and oversight, and a degree of support from the Swiss Re Group in the form of quota share and excess of loss insurance, said the agency.

The rating also reflects Confianza's position as Colombia's leading surety firm, its solid profitability and sound capitalization metrics.

Factors limiting the rating include Confianza's relatively small scale and lack of diversification, with nearly 80% of premiums generated by the surety segment.

The agency also pointed to Colombia's sovereign credit profile (with government bonds rated at Baa2/stable) as a limiting factor.

As for Swiss Re Corporate Solutions, the firm maintains a strategic interest in the growing surety sector in Latin America, as evidenced by its strong participation in Brazil through SRCS Brasil Seguros, said Moody's analyst Jose Montano

The group has previously stated its interest in building its presence in Latin America's more stable and faster-growing markets.