AM Best Affirms Credit Ratings of Kenya Reinsurance Corporation Limited

LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating (FSR) of B (Fair) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bb+” (Fair) of Kenya Reinsurance Corporation Limited (Kenya Re) (Kenya). The outlook of the Long-Term ICR is negative, while the outlook of the FSR is stable.

The ratings reflect Kenya Re’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and weak enterprise risk management.

The negative outlook on the Long-Term ICR reflects poor non-life underwriting profitability in recent years, demonstrated by considerably weaker results than its historical average and regional peers. Although Kenya Re has not yet released financial results for year-end 2020, AM Best anticipates that underwriting performance will have improved materially compared with the prior year, when the company reported a combined ratio of 117.5%. Failure to improve underwriting performance materially in the short term likely will result in a negative rating action.

Kenya Re’s balance sheet strength assessment is underpinned by risk-adjusted capitalisation that is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Capital consumption is influenced significantly by the company’s exposure to illiquid investments, such as private equity and real estate, which together account for over 50% of capital and surplus. The balance sheet strength assessment also considers Kenya Re’s exposure to the high levels of economic, political and financial system risks that are associated with the company’s core markets.

Kenya Re operates as a composite reinsurer primarily across Africa and Asia, with a focus on markets in East Africa. The company has privileged market access in Kenya, where it benefits from a 20% compulsory cession from domestic insurers. Its competitive position is significantly weaker in other markets. Kenya Re’s risk management framework is considered to be evolving, and its risk management capabilities are weak when compared with its risk profile.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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