AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Nova Casiopea Re S.A. (NCRe) (Luxembourg). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect NCRe’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

NCRe is a single-parent captive of Telefónica, S.A. (Telefónica), a multinational broadband and telecommunications provider, headquartered in Spain.

NCRe’s balance sheet strength assessment is underpinned by its strongest level of risk-adjusted capitalisation, on both a standard and catastrophe-stressed basis, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by capital buffers in the form of equalisation reserves. The assessment also reflects NCRe’s conservative and liquid investment portfolio. An offsetting factor is the company’s elevated exposure to natural catastrophe risk, which has the potential to introduce volatility to capitalisation levels.

The adequate operating performance assessment reflects the captive’s good, albeit fluctuating underwriting results since inception. In 2024, NCRe generated a pre-tax profit of EUR 21.7 million compared with EUR 21.1 million in 2023 supported by a robust underwriting performance and solid non-technical profits. NCRe’s combined ratio stood at 63.7% at year-end 2024 (as calculated by AM Best). Prospective performance is subject to potential volatility due to exposure to catastrophe events.

NCRe is well entrenched in Telefónica’s risk management framework reflecting its strategic importance to the group as a cost-effective risk management tool. NCRe maintains a broad portfolio mix and benefits from Telefónica’s geographic diversification, but as a pure captive its business profile remains constrained to Telefónica’s operations and strategic decisions. AM Best notes that the ongoing spin-offs of Telefónica’s businesses in Latin America (except for Brazil) could impact the captive’s profile, shifting its natural catastrophe exposure, among other impacts.

AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

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