Poor technical performance of Kenya Reinsurance Corporation (Kenya Re) in recent years, demonstrated by non-life underwriting results that have been weaker for two years running, as earned it a negative outlook from AM Best, a US-based global credit rating agency.
Available figures indicate that Kenya Re reported an unaudited non-life underwriting loss of KSh 2.6 billion in 2019, significantly higher than the loss of KSh 1.1 billion in 2018.
The deterioration in performance was not anticipated by AM Best and was driven primarily by the company’s books of business in the Middle East and Asia. While Kenya Re’s 2019 net income improved to KSh 4.0 billion compared to KSh 2.3 billion in 2018, primarily driven by a one-off unrealized gain of KSh 1.9 billion from an investment property write-back.
With the International Monetary Fund (IMF) projecting negative economic growth for Sub-Saharan Africa in 2020, AM Best expects operating conditions to be challenging.
Failure to improve underwriting performance materially will likely result in a further negative rating action for Kenya Re. Kenya Re has also received a Financial Strength Rating (FSR) of B (Fair) from AM Best with the FSR remaining stable. This rating reflects Kenya Re’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and weak enterprise risk management.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. It does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.