04 October 2017
Reporter: Barney Dixon

Dow Chemical captive rated ‘excellent’

A.M. Best has affirmed the financial strength rating and long-term issuer credit rating of Dorinco Reinsurance Company at “A (Excellent)” and “a”, respectively.

Dorinco, which is a subsidiary of Liana Limited, and the captive reinsurance company of Dow Chemical Company, was created to help Dow efficiently manage its risks.

It issues direct property and liability insurance policies to Dow and related companies and works on property and casualty reinsurance treaties covering Dow and unrelated parties with other insurance companies.

A.M. Best said the ratings were down to Dorinco’s strong combined ratios, positive net income and adequate risk-adjusted capitalisation while maintaining a conservative investment portfolio.

However, A.M. Best said Dorinco’s limited reinsurance portfolio, which is down to it functioning as a hybrid captive insurer and reinsurer, partially offsets the positive rating factors, as well as Dorinco’s exposure to Dow’s risks, “many of which are long-tailed and natural catastrophe exposed”.

Unfavourable operating trends, significant catastrophe or investment losses and a significant decline in risk-adjusted capitalisation or loss of parental support could lead to negative ratings action.

The rating agency suggests that with a continued profitable operating performance, an enhancement of Dorinco’s reinsurance profile and a continued improvement in risk-adjusted capitalisation could lead to positive ratings action for the company.

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