Best’s Special Report: A.M. Best Benchmarking Analysis Highlights Strengths, Limitations of Rated Insurers in Sub-Saharan Africa

LONDON--()--Analysis of A.M. Best-rated companies in Sub-Saharan Africa under the rating agency’s updated Best’s Credit Rating Methodology (BCRM) and new building block approach revealed that overall, companies have very strong balance sheet strength. Along with balance sheet strength, the key pillars A.M. Best uses in its analysis are operating performance, business profile and enterprise risk management (ERM). The report states that this rated population, in general, has adequate operating performance, neutral or limited business profiles and utilises marginal ERM structures.

The Best’s Special Report, “(Re)insurers in Sub-Saharan African Markets – Rating Review Highlights,” states that the majority of companies’ balance sheet assessments fall into the “Very Strong” category, mainly reflecting (re)insurers exposure to the quality of assets, quality and appropriateness of reinsurance programmes, strength of reserves and investment volatility. The relatively basic or non-existent approach to asset-liability management and liquidity management, in addition to country risk, were also important drivers to this assessment.

Of the rated companies, 90% were considered to have “Neutral” or “Limited” business profile assessments, a reflection of intense market competition, rising expense ratios related to increased regulation and high dependence on inward reinsurance commissions for direct writers. Also of particular note to A.M. Best is that half of the companies’ business profiles are viewed as limited, indicating that they are not market leaders, but nonetheless are seen as competitive in their chosen markets.

“Most companies in Sub-Saharan African economies, while having local market profiles, remain restricted in international terms and can face significant competition,” said Rishwinder Grewal, an A.M. Best financial analyst. “These entities tend to have some concentration or limited control of distribution, and there is a moderate level of product risk, albeit with limited severity and frequency of loss.”

According to the report, a significant proportion of companies have a “Marginal” or “Weak” ERM assessment, which is indicative of the current state of development of these markets, which operate widely under weaker, albeit improving, regulatory regimes.

Over the past few years, the Sub-Saharan African entities rated by A.M. Best have experienced very few rating actions. A.M. Best believes that whilst there are opportunities to be tapped, with some inroads available to external firms and interests, the recent upsurge in protectionist stances means that such opportunities are starting to be limited. With a scarcity of disruption from external companies to test or encourage (re)insurers to innovate, push the market forward and ultimately enhance their profiles and performance, the observable outcome is that insurance markets are in a period of relative tranquility.

To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=273380.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Rishwinder Grewal, +44 20 7397 0321
rishwinder.grewal@ambest.com
Financial Analyst
or
Mahesh Mistry, +44 20 7397 0325
Senior Director, Analytics
mahesh.mistry@ambest.com
or
Yvette Essen, +44 20 7397 0322
Director, Research, Communications
& Media – Europe, Middle East & Africa
yvette.essen@ambest.com
or
Edem Kuenyehia, +44 20 7397 0280
Director, Market Development & Communications
edem.kuenyehia@ambest.com

Contacts

A.M. Best
Rishwinder Grewal, +44 20 7397 0321
rishwinder.grewal@ambest.com
Financial Analyst
or
Mahesh Mistry, +44 20 7397 0325
Senior Director, Analytics
mahesh.mistry@ambest.com
or
Yvette Essen, +44 20 7397 0322
Director, Research, Communications
& Media – Europe, Middle East & Africa
yvette.essen@ambest.com
or
Edem Kuenyehia, +44 20 7397 0280
Director, Market Development & Communications
edem.kuenyehia@ambest.com