The national scale ZAR currency claims paying ability rating accorded to Hannover Reinsurance Africa Limited (“Hannover Re’) has been affirmed at AA+ (double A plus), with the international scale US$ currency claims paying ability rating affirmed at A (single A).
Hannover Re’s rating is underpinned by its position as a top tier player in the South African reinsurance market, as well as its strong brand and highly regarded management team. Hannover Re forms an integral part of the group’s African operations, being the main vehicle for distributing capacity between the South African operating entities, and ultimately channelling profitable business to the parent. Specifically, the reinsurer is able to access profitable niche business via its proportional participation in several books of business that are written through Compass and Lireas owned UMA’s. Further, note was taken of the reinsurer’s increasing presence as a lead reinsurer in the open market.
The international solvency margin is expected to remain sound, supported by retrocession cover from Hannover Re Germany, which is rated AA- internationally (as at June 2011). This is complemented by a strong risk management culture, comparatively low underwriting volatility and prudent reserving approach. Hannover Re has a low risk balance sheet, with non-strategic investments exclusively comprising cash and fixed income securities. Accordingly, liquidity measures remain comfortable and exposure to credit risk is considered low.
To date, the impact on the South African market of the large catastrophe losses in the global reinsurance market in early 2011 has been relatively contained, with the region still considered an attractive diversification opportunity and capacity remaining high. However, the South African reinsurance market continues to be impacted by competitive rates pressure, which could constrain margins in Hannover Re’s open market business. The international scale rating has pierced the sovereign risk ceiling due to the level of support provided by Hannover Re’s highly rated parent company.
Marc Chadwick https://globalratings.net/uploads/files/September_2011.pdf
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