AMSTERDAM--(BUSINESS WIRE)--AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Credendo – Single Risk Insurance AG (Credendo – Single Risk) (Austria).
The ratings reflect Credendo – Single Risk’s balance sheet strength, which AM Best categorises as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management. The ratings also reflect the support of Credendo – Single Risk’s parent, Credendo Export Credit Agency. AM Best expects Credendo Export Credit Agency, which is the operating holding company of a group of trade credit and political risk insurance companies, to continue to provide support to Credendo – Single Risk due to its importance to the group, particularly as a means of diversification.
The negative outlooks reflect AM Best's expectation that underwriting volatility related to global economic disruptions as a result of the COVID-19 pandemic is likely to adversely impact Credendo – Single Risk’s efforts to improve its track record of weak underwriting performance in the short term.
Credendo – Single Risk’s technical results remained poor in 2019, with a combined ratio of 172%. The company has reported technical losses each year since 2015, with a five-year average combined ratio of 149% (2015-2019), as calculated by AM Best. The weak underwriting result in 2019 was largely driven by continued poor loss experience and a high expense ratio, which was a result of continuous low levels of net earned premiums as the company has put an increased focus on risk selection since 2017.
The company’s balance sheet strength is underpinned by risk-adjusted capitalisation that AM Best expects to be maintained at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The balance sheet strength assessment also factors in the company’s good liquidity profile. Risk-adjusted capitalisation benefits from low net underwriting leverage and improved in 2019 due to a reduction in asset risk.
Credendo – Single Risk’s limited business profile reflects its relatively small size and absence of diversification as a monoline credit insurer operating in a highly competitive market environment.
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