GCR has reaffirmed The Joint Reinsurance Company of Member States of CIMA’s (“CICA-Re”) domestic FCFA currency claims paying ability rating of AA (double A), whilst the international US$ currency claims paying ability rating was maintained at BB+ (double B plus). Both ratings have also been maintained on rating watch.
Shareholders of CICA-Re comprise 12 of the original member States of CICA (holding no less than 51% of capital on a combined basis), insurance companies and other organisations. As such, the rating was supported by CICA-Re’s favourable strategic position given its legal mandatory cessions in the CIMA zone and widely diversified sovereign equity participation. Furthermore, cognisance was taken of the consistent strengthening of the company’s international solvency margin over the review period, whilst the planned capital raising of CFA10bn (with CFA3.9bn received to date) is supportive of the current rating. Lead retrocession counterparties are international investment grade rated, which also holds true in terms of the largest investment counterparty, holding 37% of total cash offshore. However, with the majority of assets locally domiciled, the international rating is impeded by the fact either unrated or have below investment grade ratings.
The relative lack of diversification in the investment portfolio was also noted. More specifically, investment performance is limited by the significant deposit amounts being held by ceding companies, which are generating very low returns. In addition, cognisance was taken of the high level of premium receivables, which increases capital risk. The ratings have also factored in the company’s limited international market profile, operational size and capital base. Further GCR believes that the company’s current risk management framework requires improvement.
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