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Fitch Ratings : affirms Eurco Re ratings

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Fitch Ratings has affirmed Eurco Re Limited’s Insurer Financial Strength (IFS) at ‘BBB’. The Outlook is Stable.

Eurco Re’s IFS rating was affirmed following its parent company Belfius Insurance’s (previously Dexia insurance Belgium) decision that Eurco Re will exit third party reciprocal reinsurance treaties in an orderly way. Fitch expects that Eurco Re will maintain its current strong capital position and meet its current obligations after the strategic revision. This view is supported by a letter of comfort which has been provided by Belfius Insurance and presented to the Irish regulator, stating that it will ensure that Eurco Re has a margin of solvency capital equal to at least 150% of the regulatory minimum.

Eurco Re’s ownership by Belfius Insurance (previously Dexia Insurance Belgium) provides uplift to Eurco Re’s rating to a level two notches below that of Belfius Bank (previously Dexia Bank Belgium; ‘A-‘/Stable, Viability Rating ‘bb’). Belfius Bank is the parent of Belfius Insurance, Eurco Re’s immediate parent.

The Stable Outlook reflects Fitch’s expectations that Eurco Re would continue to benefit from potential support from its immediate parent Belfius Insurance or from its ultimate parent company Belfius Bank. Given the relative small size of Eurco Re’s operations, Fitch believes that even in a run-off scenario the parent would have the ability and willingness to support its Irish subsidiary.

Belfius Bank is a leading Belgian bank owned by the Belgian federal state. Eurco Re acts as the group’s only active reinsurer with bank counterparties that are significant in Belfius Bank’s banking activities. As a result, Fitch believes that based on its ownership, Eurco Re would likely benefit from support from the group if ever it were needed.

About 35% of Eurco Re’s gross premium income is from intragroup business. In addition, its third-party business ultimately arises because Eurco Re is a part of the Belfius Bank group. Fitch therefore considers Eurco Re to be entirely dependent on the Belfius Bank group for business. In 2012, Eurco Re’s net premium income was EUR226m.


The key rating triggers that could result in a downgrade of Eurco Re include a reduction in Fitch’s view of potential support from Belfius Bank or Belfius Insurance as reflected in a modification in the commitment of support reducing the margin of solvency capital below 150%, a material change in Eurco Re’s operations, or a downgrade of the parent. An upgrade is unlikely in the near term.