GCR increases Botswana’s insurance sector risk score to ‘5.25’ from ‘5.00’
Johannesburg, 30 September 2021: GCR Ratings (“GCR”) has increased the insurance sector risk score for Botswana to ‘5.25’ from ‘5.00’ on the overall positive impact of enhanced regulatory environment and healthier competitive dynamics, more than offsetting concerns from slower industry gross premiums growth rates and increased industry concentration from recent mergers and acquisitions.
The Insurance sector risk score (ranging from 0 to 15) is a key factor in the operating environment component score. The core of the GCR Ratings Framework is based on GCR’s opinion that an entity’s operating environment largely frames its creditworthiness. As a result, the operating environment analysis anchors the underlying risk score for the GCR rating methodology. GCR combines elements of the country risk and sectoral risk analysis, blended across countries for entities operating across multiple jurisdictions, to anchor an insurer to its current operating conditions. For more details on any of the above, please read the related criteria and research listed below.
GCR periodically publishes updated “Insurance Sector Risk Scores”, which will supersede previous publications. The publication titled “GCR Insurance Sector Risk Scores, 30 September 2021”, available at https://gcrratings.com/risk-scores/, supersedes the article published on 22 April 2021.
Insurance sector risk scores
Republic of Botswana, Sector Risk Score 5.25. Country Risk Score 7.75*, Mapping Table 7.5 to 8.0
Botswana’s insurance sector risk score of ‘5.25’ balances an enhanced regulatory environment, healthier competitive dynamics, slower real gross premium growth rate and increased industry concentration. The enactment of Insurance Industry Act 2015 (effective 2019) along with various prudential measures entrenched risk-based solvency management and enhanced control of underwriting behaviour to manage industry earnings and liquidity risk. Nonetheless, this was offset by increased industry concentration following several high-profile mergers and acquisitions in the short-term industry and historically very high concentration in the long-term industry. The country’s insurance penetration remained comparatively high within the region at c.3.0%, lending support to overall sector strength. The score also factors in low insurance density of USD202, albeit measuring higher than regional peers. Improved prudence in industry conduct is expected to reduce volatile and slower real gross premium growth trends in the short-term industry, with similar trends beginning to take hold in the long-term industry. We positively note an improvement in short-term industry underwriting margins, complementing the long-term industry, and expect this trend to be supported by the adoption of risk-based supervision. Botswana’s financial sector score has a neutral impact on the insurance sector risk score.
Deputy Sector Head: Insurance Ratings
Johannesburg, South Africa
+27 11 784 1771
Group Head of Ratings
Johannesburg, South Africa
+27 11 784 1771
Related criteria and research
Criteria for the GCR Ratings Framework, May 2019
Criteria for Rating Insurance Companies, May 2019
GCR Ratings Scales, Symbols & Definitions, May 2019
GCR Country Risk Scores, August 2021
GCR Financial Institutions Risk Scores, September 2021
CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.
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