AM Best Affirms Credit Ratings of Compagnie Centrale de Réassurance

AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Compagnie Centrale de Réassurance (CCR) (Algeria). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect CCR’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and marginal enterprise risk management. The ratings do not include any lift or drag from the company’s ownership by the nation of Algeria.

CCR’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which was at the strongest level at year-end 2020, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by relatively low underwriting leverage and good internal capital generation. The company has a moderate dependence on retrocession coverage, which is used to protect peak exposures, notably domestically in Algeria. The balance sheet is protected further by a state guarantee (in the form of an interest free loan facility) covering business written as part of Algeria’s compulsory natural catastrophe scheme, which represented 10% of CCR’s gross written premiums (GWP) in 2020. The balance sheet strength assessment also factors in CCR’s exposure to elevated and increasing levels of economic, political and financial system risk associated with Algeria, with approximately 95% of assets invested domestically.

CCR’s strong operating performance assessment reflects its track record of operating profitability, with a five-year (2016-2020) weighted average return-on-equity ratio of 13%. Operating results have been underpinned by stable and robust technical results and good investment returns. The company’s strong five-year weighted average combined ratio of 83% over the same period is driven by its highly profitable domestic business in Algeria, which easily absorbs the relatively weaker performance associated with the company’s international expansion. AM Best expects prospective underwriting profitability to remain robust, supported by relatively low net risk retention, a conservative underwriting approach and favorable domestic market conditions.

The company’s neutral business profile reflects its dominant position in Algeria’s reinsurance market, where it had an estimated market share of 60% in 2020, as measured by ceded premium. CCR continues to benefit from compulsory reinsurance cessions in its domestic market. The company’s strong domestic market position, however, also creates a concentration and reliance on the Algerian market, which remains a partially offsetting factor. In 2020, CCR generated 82% of its GWP in this market, although it has been gradually increasing its share of international business in recent years.

CCR’s risk management framework is considered at an early stage of development, although this has been an area of focus and development for the company over recent years. AM Best expects risk management capabilities to improve with the integration of an internal capital model in company’s strategic decision-making process.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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