Coralisle Group’s Beacon warning
There are warnings about the future of a Caribbean insurer, in which a Bermuda company acquired a sizeable stake three years ago.
The warnings came as Caribbean Information and Credit Rating Services Limited (CariCRIS) affirmed ratings for Beacon Insurance Company Limited, indicating their creditworthiness and financial strength ratings were good.
Beacon Insurance is the fourth largest insurer in Trinidad and Tobago, a broker-led, regional player with branch offices and an agency network that apart from Trinidad & Tobago, includes Barbados, Grenada, St Lucia, St Vincent & The Grenadines, St Kitts & Nevis, and Dominica.
It specialises in general insurance for individuals and business clients, offering a range of products including property, motor, accident and casualty, marine cargo and hull, bonds, and engineering insurance.
In 2018, 40 per cent of the company was acquired by the privately-held Bermuda insurer, Colonial Group International Limited (CGI), now known as Coralisle Group Limited (CG Insurance), which has commercial operations in Bermuda, Barbados, the Cayman Islands, the Bahamas, the British Virgin Islands, and Turks & Caicos Islands.
CGH Limited retains 46 per cent of Beacon and the remaining 14 per cent is held by an individual shareholder.
Calls to Naz Farrow, CEO of Coralisle Group Ltd were not returned.
At the time of the purchase, Coralisle and Ms Farrow said the partnership was expected to generate significant growth opportunities for both insurers.
Barbados Today, the online newspaper, is reporting that CariCRIS) has warned that economic challenges facing Barbados and other Eastern Caribbean states could impact Beacon’s profitability and growth.
CariCRIS reaffirmed its assigned corporate credit ratings of CariA- (Foreign and Local Currency Ratings) on the regional rating scale and ttA- on the Trinidad and Tobago (T&T) national scale.
It reaffirmed the company’s financial strength rating of CariA- expressing confidence in its ability to meet ongoing insurance obligations and remain adequately capitalised.
Beacon’s premium is rising and it enjoyed good financial performance and healthy capitalisation, together with a historically strong reinsurance programme.
And while CariCRIS was upbeat on the company’s well diversified investment portfolio and satisfactory asset quality, they said the rating strengths were “tempered by Beacon’s high reliance on insurance brokers, which may threaten the stability of its earnings”.
They also added: “Economic challenges currently faced in Barbados, Trinidad and Tobago and the Eastern Caribbean, precipitated by the COVID-19 pandemic may constrain profitability and growth.”
CariCRIS also revised the outlook on the ratings to stable from negative. The ratings agency said that was based on its expectation that Beacon would maintain stable earnings and profits over the next 12-15 months, driven by continued profitable operations supported by stable income.
The rating agency said that factors that could individually or collectively lead to a lowering of the ratings and/or outlook, include a two-notch deterioration of the credit rating of Beacon’s top reinsurer or deterioration of the company’s capital adequacy ratio to 150 per cent, on a sustained basis for at least six months under normal conditions.
But it also pointed to factors that could lead to an improvement in the ratings and/or outlook.
They are a 10 per cent improvement in market share of general insurance products in its largest market, Trinidad and Tobago; an improved credit profile for Beacon’s fixed income portfolio where more than 60 per cent of the portfolio is rated investment grade on the S&P rating scale; an enhancement of Beacon’s risk management through the complete roll-out of an enterprise risk management system; or increased profitability leading to more than a 2.5 per cent return on assets and return on equity of 10 per cent for two consecutive financial periods.