AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” (Good) of Black Gold Re Limited (BGRe) (Bermuda). The outlook of these Credit Ratings (ratings) is stable.

BGRe is a captive reinsurer of Ecopetrol S.A. (Ecopetrol) [NYSE: EC], a Colombia-based integrated energy company that is 88.49% owned by Colombia’s government.

The ratings of BGRe reflects its 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 (ERM). The ratings also recognize the importance of the company within Ecopetrol’s strategy.

BGRe’s very strong level of balance sheet strength reflects its capital management strategy and ability to build up capital. The company has low net underwriting leverage, creating dependence on reinsurance; however, these associated risks are mitigated partly by a diversified mix of well-rated reinsurers. AM Best expects BGRe to maintain a capital buffer as it continues to adjust its risk appetite to the reinsurance needs of its parent company, as well as the overall reinsurance market conditions.

BGRe’s operating performance is characterized by profitable technical results backed by well-established underwriting principles and considerable revenue from ceding commissions. Over the past few years, the company has complemented its net profit with investment results; however, dependence on this revenue is low. AM Best expects the company to continue backing its results with its technical performance.

AM Best views the company’s business profile as neutral. BGRe has access to a wide scope of insured risks given the relevance of Ecopetrol to the oil and gas industry in the Americas. However, the company’s underwriting risks are concentrated in Colombia. BGRe’s ERM is well-integrated within Ecopetrol and is important to the group as a cost-effective risk management tool.

The stable outlooks reflect AM Best's expectation that BGRe will continue to adjust its risk appetite and tolerance levels that support its parent company’s needs in terms of volume of capital and underwriting capabilities.

Positive rating actions could result if there is a sustained favorable trend in operating performance as the company’s strategy continues to adapt to the reinsurance market. Negative rating actions could occur if business flow is limited by any change in its holding company or if the financial situation of the parent company is compromised by any sociopolitical or economic event. Negative rating actions could also take place if the balance sheet strength of the company is further stressed by the materialization of any risk exposure.

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.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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