The ratings of East Africa Re continue to reflect its modest competitive position in its regional reinsurance market, as well as its supportive risk-adjusted capitalisation and resilient operating performance. The ratings also consider East Africa Re’s exposure to Kenya’s socio-economic difficulties.
East Africa Re’s competitive position continues to be limited by the compulsory legal cessions enjoyed by its larger competitors in the local and regional markets. These legal cessions require cedants to reinsure a portion of their business with some of East Africa Re’s competitors before ceding business to the open market. Additionally, the company operates in a competitive environment with larger reinsurers that benefit from better economies of scale.
Although risk-adjusted capitalisation deteriorated during 2014, it remains supportive of the company’s current operations and projected business plan. Growth in premium volume, increased investment risk appetite and reassessment of natural catastrophe exposure increased the company’s capital requirements during 2014; however, this is expected to be partially matched by higher retained earnings.
East Africa Re’s performance remains resilient, with a five-year average return on capital of 14%. The company’s results in recent years have been supported by positive investment returns, which have offset a deteriorating performance in motor and medical lines of business, which remain challenging across the market. East Africa Re is actively managing these business classes and is refraining from renewing a number of loss-generating treaties.
Positive rating actions could occur if East Africa Re’s competitive profile improves materially, delivering growth in technical profitability, whilst maintaining risk-adjusted capitalisation at a strong level. Negative rating actions could occur due to a sustained decline in East Africa Re's business profile or a deterioration of its financial performance. Additionally, East Africa Re’s ratings could be negatively affected if Kenya’s economic conditions worsen.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
Risk Management and the Rating Process for Insurance Companies
Understanding Universal BCAR
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
This rating announcement has been issued by A.M. Best Europe – Rating Services Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
Contacts
A.M. Best
Pablo Vasquez, +(44) 20 7397 0311
Financial Analyst
pablo.vasquez@ambest.com
or
Tim Prince, +(44) 20 7397 0320
Associate Director, Analytics
timothy.prince@ambest.com
or
Christopher Sharkey, +(1) 908 439 2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com
No comments:
Post a Comment