AM Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a+” (Excellent) for Scotia Reinsurance Limited (Scotia Re), based in Barbados. The outlook for both ratings is stable.
According to AM Best, the ratings are based on Scotia Re’s balance sheet strength, which it categorizes as very strong, in addition to the company’s operating performance, business profile, and enterprise risk management framework.
Scotia Re adopted IFRS 17 reporting standards on Oct. 1, 2023. Under the new framework, the company reported approximately US$73 million in equity at the end of fiscal year 2024. This marked an increase from about US$48.8 million at the end of fiscal year 2023 on a comparable IFRS 17 basis, and from $53.9 million as reported under the previous IFRS 4 standard.
The company’s transition to IFRS 17 included the recognition of a contractual service margin liability, which contributed to a decline in reported capital at the time of adoption. This liability is expected to be released into earnings over time.
Scotia Re primarily reinsures credit life, health, and disability insurance products offered to Scotiabank customers through its International Banking retail operations.
Scotia Re’s underwriting volume experienced a decline in recent periods following strategic exits from certain product lines in markets such as Mexico, Peru, and parts of the Caribbean.
In 2024, Scotia Re suspended dividend payments to its parent, BNS International (Bahamas) Limited, a holding entity ultimately owned by The Bank of Nova Scotia (Scotiabank).
The decision to pause dividend distributions in fiscal 2024 is part of Scotia Re’s capital preservation strategy. The suspension, initiated in the context of IFRS 17 adoption, was intended to strengthen retained earnings and buffer potential volatility during the transition period.
Meanwhile, Scotia Re’s parent, Scotiabank, continues to be a significant source of financial flexibility for the reinsurer. At the close of fiscal year 2024, the Canadian banking group reported CA$84 billion in total equity and CA$1.4 trillion in assets. Net income reached approximately CA$7.9 billion on revenue of CA$34 billion.
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