AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” (Excellent) of Royal Bank of Canada Insurance Company Ltd. (RBCICL) (Cayman Islands). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect RBCICL’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

RBCICL is owned ultimately by Royal Bank of Canada (RBC), the largest bank in Canada as measured by market capitalization. The parent bank is a strong organization with approximately CAD 118 billion of IFRS equity at financial year-end 2023 and CAD 2 trillion in assets. The group earned approximately CAD 14.9 billion in net income on CAD 56 billion in revenue in fiscal-year 2023. AM Best notes that RBC does not guarantee support, but may at its discretion provide additional capital should RBCICL need capital to maintain its risk-adjusted capitalization level, as measured by Best’s Capital Adequacy Ratio (BCAR). In fiscal-year 2023, RBCICL reduced the dividends upstreamed to its immediate parent company, to enhance its level of available capital in anticipation of its transition to IFRS 17 and to maintain its risk-adjusted capitalization.

The stable outlooks capture RBCICL’s very strong overall balance sheet strength assessment that has been maintained over the long term supported by consistently strong operating performance. The company’s favorable operating return on equity on a longstanding basis provides significant support to the balance sheet and reflects RBCICL’s appropriate underwriting practices in its Canadian creditor reinsurance and U.K. longevity reinsurance products. RBCICL’s net negative insurance policy liabilities are made up predominantly from the longevity reinsurance product. The company assumes longevity risk, highlighting the importance of the stress testing of mortality improvement assumptions that the company regularly carries out. The company also maintains a conservative portfolio of invested assets and continues to utilize interest rate swap derivatives to manage interest rate risk associated with the longevity reinsurance product.

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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