Tanzania National Reinsurance Corporation Limited’s (“Tan Re”) national scale TShs currency claims paying ability rating has been reaffirmed at A+ (single A plus), with the rating maintained on positive outlook. The international scale US$ claims paying ability rating was maintained at BB- (double B minus).
Cognisance was taken of Tan Re’s favourable strategic position in the Tanzanian market, augmented by the compulsory cession mandate. The rating is further underpinned by proposed capital raising initiatives, which are expected to see shareholders interest increase to TShs38bn by FYE11, translating into an international solvency margin of 79%. This is supported by Tan Re’s conservative investment policy, which mitigates capital exposure to financial market volatility, while allowing for adequate liquidity.
Tan Re has recorded robust underwriting profitability over the past four years, underpinned by consistent improvements in the reinsurer’s delivery cost structure (impacted positively by the enlarged scale of operations). This notwithstanding, note is taken of the consistent upward trend in relative incurred claims since F07. Additionally, the high level of competition from other reinsurers in the region (with a concomitant softening of rates), as well as the prevalence of legal cessions presents a challenge for Tan Re in terms of growing its book of business outside of Tanzania, whilst maintaining underwriting quality.
The credit quality of certain counterparties to Tan Re’s retrocession programme is non-investment grade on an international scale. This risk is, however, mitigated by the diversity of counterparties, combined with the stronger ratings of lead retrocessionaires. Tanzania has been accorded an indicative sovereign credit rating of B (single B). In this respect, the implied sovereign risk in the country is a major constraint to the international rating of the reinsurer (given that all assets are domiciled locally).
Marc Chardwick https://globalratings.net/uploads/files/November_2011.pdf
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