Sirius downgraded by AM Best because of concerns over Chinese parent

AM Best has downgraded the Financial Strength Ratings (FSR) of Bermuda-based re/insurer Sirius Bermuda Insurance Company (Sirius Bermuda), Sirius International Insurance Corporation (Sirius International), and its subsidiary Sirius America Insurance Company (Sirius America) (USA) to A- (Excellent) from A (Excellent).

The rating actions follow the execution of a written resolution on February 25 2020 by CM Bermuda (CM Bermuda), a wholly owned subsidiary of China Minsheng Investment Group Corp. (CMIG) and Sirius International Insurance Group’s (SIIG’s) controlling shareholder, which may prohibit SIIG’s board of directors from issuing any shares and taking certain other actions with respect to the shares without the prior approval of holders of the common shares of SIIG representing at least 75 percent of the shareholder voting rights. CM Bermuda has 87 percent of the shareholder voting rights.

In AM Best’s view, this recent development has the potential to affect the company’s business profile adversely and place strain on management’s time and resources at a time when the company needs to address deterioration in its operating performance.

In addition, AM Best said it needs to assess whether the safeguard mechanisms that SIIG has had in place, since its listing on the Nasdaq in 2018, are sufficiently strong to protect the independence of its operations from CMIG. AM Best said it considers the resolution executed by CM Bermuda as a sign that CMIG could exert control over SIIG’s operations via CM Bermuda, despite the presence of solid governance arrangements. The credit quality of CMIG is significantly weaker than that of SIIG.

AM Best said it will continue to engage with SIIG’s management and closely monitor any developments in the relationship between SIIG and CMIG, as well as the impact that these developments may have on SIIG’s financial strength.