Best’s News & Research Service - October 08, 2020 11:34 AM (EDT)
AM Best Affirms Credit Ratings of East Africa Reinsurance Company Limited
- October 08, 2020 11:34 AM (EDT)
London //BestWire// - AM Best has affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb+” of East Africa Reinsurance Company Limited (EARe) (Kenya). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect EARe’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management.
EARe’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). EARe’s risk-adjusted capitalisation benefits from a prudent investment allocation and low underwriting leverage. An offsetting factor is EARe’s strategy to maintain a negative currency asset-liability mismatch on its US dollar-denominated business (accounting for approximately two-fifths of the company’s 2019 gross technical provisions), which exposes the company to potential capital volatility. The ratings also consider the company’s significant exposure to the high economic, political and financial system risks in Kenya, with over 90% of EARe’s assets invested domestically.
EARe has a track record of solid operating performance in challenging market conditions, evidenced by its good five-year (2015-2019) weighted average return on equity (ROE) of 14.3%. ROE’s should, however, be viewed in light of moderate inflation in Kenya, which has averaged approximately 6% over the same period. Underwriting results have been improving, demonstrated by a reduction in the combined ratio from 100.6% in 2015 to 96.5% in 2019.
EARe is a small reinsurer by global standards, with gross written premium of USD 46.5 million in 2019. It has a presence across 32 countries in Africa and Asia, with premium volumes skewed toward East African insurance markets. EARe continues to take positive steps to improve and embed risk management throughout its operations.
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 media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data provider specialising in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.