Two ratings agencies have upgraded the financial strength ratings of Bermuda-registered Latin American Re, following a retrocession agreement with the company's owner, XL Re.

A.M. Best Co. has upgraded the financial strength rating of Latin American Re, (LARe), Hamilton, Bermuda, to A+ (Superior) from A- (Excellent). The rating action reflects the 100 percent company ownership by XL Re Ltd. (formerly XL Mid-Ocean Re Ltd.), a member of the XL Capital Ltd. Group. It also reflects the explicit support of its parent via a retrocession agreement, backing the company as a vital member of the XL Group, Best said.

"The company is a fully owned subsidiary of XL Re Ltd. and is an integral part of its parent's strategy, which is essential to the Group's ongoing success and viability in Latin America," Best said. "The company is well positioned to take advantage of this relationship, which offers strong synergies and should prospectively benefit the company's operations, presenting many cross-marketing opportunities to help the company compete in its various markets with the increase of capacity and line limits.

"LARe is focused exclusively on the Latin American region in the short tail, multi-peril property reinsurance as well as casualty, marine, aviation and other lines of reinsurance," Best said, adding that the company practised conservative loss reserving and had seen premiums continuously increased in the company's three years of operations. The company expects its underwriting performance to improve considering it began operations during the bottom of a soft market cycle, Best said.

Best also said it expected the company's "unrewarding" current operating performance to improve, with increased new business volume combined with diligent underwriting and strong asset liability management processes.

Latin American Re also announced that Standard & Poor's had increased its counterparty credit and financial strength rating to double-'A', up from single-'A-'.

"Latin American Re was founded on its ability to deliver an exclusive focus on the reinsurance market in its region,'' said Keith L. Shroyer, president and Chief Underwriter of Latin American Re.

"Now, with the global resources and explicit support of XL Re Ltd (`'XL Re"), we are able to continue this focus with even greater strength and stability, as recognised by Standard & Poor's.

"We are serving clients with a deep commitment to underwriting expertise, advanced product consultation and a customer-focused strategy.''

Standard & Poor's cited this support from XL Re as a major factor in upgrading the rating.

Standard & Poor's stated that it "believes LARe will be core to XL Re, and LARe is expected to benefit from being a member of a larger organisation through improved financial flexibility and the ability to offer clients both increased line limits and capacity.

"Operationally, LARe provides XL Re with a Latin American platform and enhances ultimate parent XL Capital Ltd's expansion efforts as a global reinsurer. Expectations are that LARe's limited client and product overlap with XL Re and its affiliates - as well as its access to emerging markets - will provide strong growth and cross-selling opportunities in the Latin American reinsurance and financial sectors.''

"By bringing Latin American Re fully within the XL Re family, we are able to enhance LARe's core qualities and operational insight by leveraging those specialised assets with XL Capital, one of the world's most respected and diversified Insurance, Reinsurance and Financial Services companies,'' said Henry C.V. Keeling, President and CEO of XL Re. "The Standard & Poor's move to increase the rating to double-'A' is a ringing endorsement of this alliance.''