LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of “a-” of Kuwait Reinsurance Company K.S.C.P. (K Re) (Kuwait). The outlook for both ratings remains stable.
The ratings of K Re reflect its strong risk-adjusted capitalisation, geographically diverse underwriting portfolio and sound enterprise risk management framework. An offsetting rating factor is the company’s weak underwriting performance during 2014.
Risk-adjusted capitalisation remains supportive of K Re’s current rating level. Gross written premiums decreased during 2014 by 16% to USD 117 million, reducing the level of underwriting risk. However, K Re made a marginal loss and distributed a dividend of USD 5.1 million, weakening its capital and surplus. Prospective risk-adjusted capitalisation is expected to be driven by the company’s ability to grow capital and surplus to support future expansion plans.
The company’s underwriting portfolio continues to be geographically diverse, with risks spread across more than 90 countries. K Re’s operations encompass the Middle East and North Africa, Asia-Pacific and Central and Eastern Europe. Further diversification arises from the company’s participation on a limited number of quota-share programmes for Lloyd’s syndicates and its partnership with an oilfield binder. K Re also has a representative office in Mauritius, which is expected to further develop the company’s presence in Africa.
K Re has well-established risk tolerances and appropriate controls covering insurance, asset and operational risks. The company has developed a capital modeling capability used for strategic decision making and is able to measure and mitigate geographical accumulations of insured risks.
K Re’s track record of good operating performance, demonstrated by profit generation in each of the past five years, was interrupted by a loss of USD 185,000 in 2014. This was a result of poor technical performance, with the combined ratio rising above 100%. K Re experienced challenging market conditions particularly in the proportional treaty segment, combined with higher expenses due to the reduced profile of the company. A.M. Best expects K Re to improve profitability by rebalancing its portfolio toward facultative and excess of loss business where it can better leverage its underwriting abilities.
Positive rating actions are unlikely in the short to medium term. Continued underwriting losses or significant deterioration in risk-adjusted capitalisation could result in negative rating actions.
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:
- Catastrophe Analysis in A.M. Best Ratings
- Evaluating Country Risk
- 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.
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