AM Best has assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb+” (Good) to Bermuda-based ASR Re Ltd. (ASR Re). ASR Re is a wholly owned subsidiary of ASR Holdings Ltd., the non-operating holding company in Mauritius of the ASR group. The outlook assigned to the credit ratings is stable.
The ratings of ASR Re reflect ASR’s consolidated balance sheet strength, which AM Best assesses as very strong, as well as the group’s adequate operating performance, limited business profile and appropriate enterprise risk management. In addition, the ratings reflect the strategic importance of ASR Re to the ASR group. ASR Re is the group’s Bermuda-based specialty reinsurer and will be the principal contributor of premium income.
In addition to writing third-party reinsurance, ASR Re will provide reinsurance protection to its subsidiary Africa Specialty Risks Reinsurer in Mauritius.
ASR is a new entrant in the African corporate specialty reinsurance sector. The group has been capitalized initially with US$20 million of common shareholders’ equity, drawn from a US$50 million facility managed by Helios Investment Partners, a private equity investor and manager with a track record of investing in companies with an African focus. AM Best said it expects the remaining US$30 million of committed capital to be drawn down over its startup five-year (2021-2025) business plan.
ASR is expected to maintain the strongest level of consolidated risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio, over its startup five-year business plan, taking into account AM Best’s additional capital requirements for new company formations.
However, AM Best said, an offsetting factor in the balance sheet strength assessment is the small absolute size of ASR’s capital and surplus, by international standards. However, the ratings agency noted that this is offset partly by the good credit quality of its retrocession panel and its small net line size.
In addition, ASR is exposed to the high levels of economic, political and financial system risks that are associated with its target operating environment in the African specialty reinsurance market. However, this is partially mitigated by robust risk management practices, good geographic diversification and a strategy to primarily reinsure assets of developed market corporates that have an African touchpoint.
The adequate operating performance assessment considers the group’s five-year business plan, taking into account its competitive environment and heightened execution risk during the startup phase.
AM Best expects the group’s operating performance to rapidly improve in line with the five-year plan. This is supported by non-technical earnings from its managing general agent operations in London and Mauritius, through which the group’s business will be sourced.
In the initial years of operation, AM Best said, the group is reliant on several third-party capacity providers, some of which have multiyear agreements, to write business. As the group matures, ASR is expected to diversify the panel of capacity providers as well as grow its direct book of business.
AM Best expects ASR to face competition from well-established global reinsurers in the African corporate specialty reinsurance market. However, the group’s competitive position likely will be enhanced “through the agile and bespoke services provided cedents and the establishment of strategic partnerships with local market participants.”
Furthermore, the group has a senior management and underwriting team in place with extensive experience in the targeted classes of business and operating environment.
In AM Best’s view, this increases the likelihood of market acceptance and successful execution of the group’s business plan.
(Editor’s note: Africa Specialty Risks was launched in September 2020 by Helios Investment Partners LLP in partnership with Mikir Shah, former CEO of AXA Africa Specialty Risks, and Bryan Howett, former CEO of Old Mutual’s pan-African reinsurance operations. The reinsurance managing general agent now provides bespoke insurance solutions in property, construction, political risk, trade credit, energy, liability and war, political violence and terrorism, with further lines of business in development.)
Source: AM Best
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Topics AM Best
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