LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Compagnie Commune de Réassurance des Etats Membres de la CIMA (CICA-RE) (Togo). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect CICA-RE’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and marginal enterprise risk management.
CICA-RE’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which was at the strongest level at year-end 2021, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects CICA-RE’s risk-adjusted capitalisation to remain comfortably at the strongest level prospectively, and sufficient to absorb increased underwriting risks linked to the company’s growth plans. CICA-RE’s balance sheet strength assessment also factors in its good financial flexibility, demonstrated through successful successive capital raises from existing and new shareholders, which have increased paid-up capital to XOF 60 billion (USD 91 million) at year-end 2022 from XOF 32 billion (USD 56 million) at year-end 2018. CICA-RE holds a well-diversified investment portfolio by asset type and geography. However, the limited quality of invested assets arising from their concentration in the Conférence Interafricaine des Marchés d’Assurances (CIMA) region and other countries exposed to elevated economic, political and financial systems risks is considered an offsetting balance sheet strength factor.
CICA-RE has a track record of adequate operating performance, with a five-year (2017-2021) weighted average return on equity of 9%. Over this period, the company has demonstrated robust technical performance, with a weighted average combined ratio of 94% (as calculated by AM Best), and good investment results. CICA-RE’s underwriting profitability is partially reflective of the underlying performance of insurance markets in the CIMA region and generally profitable open-market business outside of the CIMA zone. Prospectively, AM Best expects continued robust underwriting performance, underpinned by the company’s operations in the CIMA region, to be supported by good investment income.
CICA-RE’s neutral business profile assessment reflects its strong market position in the CIMA region, where its profile is supported by compulsory cessions on reinsurance and direct insurance business and established direct relationships with local cedants. Following revisions to the legal cessions structure in the CIMA region in 2020, CICA-RE has achieved significant portfolio growth in recent years, with gross written premium (GWP) increasing to XOF 97 billion (USD 147 million) in 2021, compared with XOF 64 billion (USD 109 million) in 2019. In 2021, the company generated over 45% of GWP from the CIMA region, including legal cession business, with the remaining conventional open-market business originated from Africa, Asia, the Middle East and Latin America.
AM Best considers CICA-RE’s risk management framework to be at an evolving stage of development, with risk management capabilities generally aligned with the profile of its key risks. Nonetheless, AM Best’s ERM assessment factors in expected ongoing ERM developments, notably as the company continues to execute its strategic growth plan.
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