LONDON--(BUSINESS WIRE)--A.M. Best has downgraded the financial strength rating to A+ (Superior) from A++ (Superior) and the issuer credit rating to “aa” from “aa+” of Caisse Centrale de Réassurance (CCR) (France). The outlook for both ratings remains stable.
The ratings reflect CCR’s superior risk-adjusted capitalisation, good operating performance and excellent business profile in France and abroad. The ratings also factor in the explicit unlimited guarantee provided by the Republic of France to CCR’s state-backed business. The downgrade reflects the deterioration in the creditworthiness of France, following an increase in economic and financial risk.
CCR’s risk-adjusted capitalisation remains strong, supported by a conservative earnings retention policy and the backing of the Republic of France. CCR offers reinsurance coverage for natural catastrophe, terrorism and other exceptional risks with the explicit support of the French state, its sole shareholder, in the form of unlimited stop-loss reinsurance. Additionally, the company writes some traditional reinsurance business not covered by the French state’s stop-loss guarantee (“open market” business). In line with guidelines provided by the French state, the traditional open market reinsurance business accounted for approximately one-third of the company’s total gross written premiums in 2014.
CCR recorded a net profit of EUR 193 million in 2014, stemming from a good technical performance and an investment return of 2.3%. The state-backed reinsurance contributed a net profit of EUR 182 million, mainly impacted by the floods in Herault and Var. The open market book of business contributed a net profit of EUR 11 million, chiefly driven by reserve releases relating to the 2011 Thai floods. Overall CCR published a strong net combined ratio of 69% for 2014, against 71% recorded in 2013.
CCR maintains a unique position as the main reinsurer of natural catastrophe risks underwritten in France with an estimated market share of approximately 90%. The company is expected to retain its strategic importance for the French state as a provider of reinsurance for risks typically considered uninsurable. CCR should also maintain a good profile in the open market, although this portfolio of business will continue to be incidental to its main strategic mission.
Downward or upward rating movement could occur depending on A.M. Best’s change in its assessment of the creditworthiness of France.
Negative rating actions could also occur if the level of explicit support given to CCR by the French state were to change.
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 utilised:
- Understanding Universal BCAR
- Evaluating Country Risk
- Risk Management and the Rating Process for Insurance Companies
- Catastrophe Analysis in A.M. Best Ratings
- Rating Members of Insurance Groups
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