AM Best Affirms Credit Ratings of Kenya Reinsurance Corporation Limited

AM Best has affirmed the Financial Strength Rating of B (Fair)
and the Long-Term Issuer Credit Rating of “bb+” of Kenya Reinsurance
Corporation Limited (Kenya Re) (Kenya). The outlook of these
Credit Ratings (ratings) is stable.

The ratings reflect Kenya Re’s balance sheet strength, which AM Best
categorises as very strong, as well as its adequate operating
performance, neutral business profile and weak enterprise risk
management (ERM).

Kenya Re’s risk-adjusted capitalisation, as measured by Best’s Capital
Adequacy Ratio (BCAR), is assessed as strongest. Offsetting balance
sheet strength factors include uncertainties related to the company’s
natural catastrophe exposure and the very high financial system risk
associated with operating in Kenya. AM Best expects Kenya Re’s
risk-adjusted capitalisation to remain at the strongest level over the
longer term benefitting from robust retained earnings. The company has
delivered an average return on capital and surplus of 15% over the past
five years (2013-2017), considerably ahead of average inflation, which
has been in the region of 7% per annum. Investment income was the
primary contributor to profit over this period, whilst the average
combined ratio was 96%. AM Best expects investment returns to trend
lower compared with recent years over the coming years.

Kenya Re’s business profile benefits from a very strong market position
in Kenya where the company enjoys mandatory cessions of 20% and
generates in the region of 53% of its gross written premium. However,
this is offset by a significantly weaker competitive market position
elsewhere.

While AM Best acknowledges management’s efforts to improve risk
management, Kenya Re’s ERM is developing from a low base, and AM Best
believes that the risk management function’s ability to evaluate
measures relevant to financial strength and performance, generate
corporate actions, and influence management decisions is only emerging.
Furthermore, governance concerns are raised over the dismissal and
subsequent reinstatement of the managing director.

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 Understanding
Best’s Credit Ratings. For information on the proper media
use of Best’s Credit Ratings and AM Best press releases, please view Guide
for Media - Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.

AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit www.ambest.com
for more information.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
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