AM Best Downgrades Credit Ratings of WAICA Reinsurance Corporation PLC; Places Credit Ratings Under Review With Negative Implications

LONDON--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating to B (Fair) from B+ (Good) and the Long-Term Issuer Credit Rating to “bb+” (Fair) from “bbb-” (Good) of WAICA Reinsurance Corporation PLC (WAICA Re) (Sierra Leone). Concurrently, AM Best has placed these Credit Ratings (ratings) under review with negative implications.

The ratings reflect WAICA Re’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, limited business profile and marginal enterprise risk management.

The rating actions follow the announcement by Ghana’s Ministry of Finance on 5 December 2022 that domestic government bonds existing as of 1 December 2022 (excluding treasury bills) will be exchanged for four new bonds with longer maturity dates and lower coupons. An announcement on external government debt is anticipated in the near term.

The downgrades reflect the revision of WAICA Re’s balance sheet strength assessment to strong from very strong, due to the impact of a material deterioration in the credit quality of the company’s investments in Ghana on its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy (BCAR). The company’s risk-adjusted capitalisation has already been adversely impacted by significant growth in 2020 and 2021. Debt issued by the government of Ghana (including treasury bills) represents around 75% of the company’s government bond portfolio as at year end 2021. In addition, the company is exposed to Ghana’s banking sector through cash and term deposits.

Heightened levels of political, economic and financial system risk persist in Ghana, where the company holds around 40% of its assets and generates around 15% of its revenue. The ratings have been placed under review with negative implications as AM Best is continuing to assess the impact of deteriorating economic and operating conditions in Ghana on the company’s balance sheet strength and broader credit fundamentals, including the potential risk of significant investment losses due to government debt restructuring.

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 use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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