Announcements Criteria

GCR Publishes New Criteria for Rating Insurance Companies

Johannesburg, 22 May 2019: GCR Ratings (‘GCR’) has published the following new criteria for rating insurance companies.

Criteria for Rating Insurance Companies

The criteria is available for download at www.GCRratings.com/criteria.

The criteria includes a summary of how it fits into the overarching GCR Ratings Framework, details of which are available in the Criteria for the GCR Ratings Framework (please click here for further details). The criteria includes a scope and summary of key changes, together with a breakdown of how each of the components is to be assessed and scored.

The new Criteria for Rating Insurance Companies has rolled the previous six insurance criteria into one, with appendices attending to additional considerations for specific business or risk types. As a result, GCR will be retiring the following:

  • Global Master Criteria for Rating Long Term Insurance Companies, updated May 2018
  • Criteria for Rating Newly Established and Start-Up Insurance Companies, updated May 2018
  • Criteria for Rating Insurers’ Debt and Hybrid Equity Instruments, updated May 2018
  • Criteria for Rating Cell Captive Insurers, updated May 2018
  • Criteria for Rating South African Medical Schemes, updated May 2018

Entities previously rated under these retiring criteria shall be assessed under the ‘Criteria for Rating Insurance Companies’.

GCR will accord “Financial Strength” ratings to all insurers going forward, replacing the term “Claims paying ability” previously applied to short term insurers. Nevertheless, financial strength ratings are an equivalent assessment of an insurer’s capacity to honour obligations to policyholders (i.e. the Financial Strength rating is a change in nomenclature only, and is not a change in the basis or outcome of the analysis).

The new criteria retains much of the fundamentals utilised in the previous GCR methodologies. Of significance is the criteria’s alignment to the broader GCR Ratings Framework. Furthermore, a more consistent approach to rating debt instruments has been adopted, which replaces the previous insurance-specific Criteria for Rating Insurers’ Debt and Hybrid Equity Instruments, updated May 2018.

GCR previously invited comment on the criteria from market participants. There have been no significant amendments to the criteria based on feedback. Smaller changes to the criteria include increased explanation regarding how the criteria/ framework is utilised, as well as various editing changes.

GCR anticipates a moderate to moderately high impact on the ratings of rated insurance entities.

All insurance companies and South African medical schemes rated by GCR have been placed “Under Criteria Observation”. The ratings of all affected entities will be reviewed using the new criteria over the next six months (between May 23 2019 and November 22 2019), which results in previously applicable review dates for these entities being potentially extended or brought forward.

Analytical Contacts

Yvonne Mujuru Marc Chadwick

Sector Head: Insurance Ratings Chief Ratings Officer

ymujuru@GCRratings.com chadwick@GCRratings.com
+27 11 784 1771 +27 11 784 1771
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