Credit rating agency A.M. Best has downgraded the financial strength rating to B, Fair, from B+, Good, and the Long-Term Issuer Rating to bb+ from bbb- of Kenya Reinsurance Corporation Limited, Kenya Re. The outlook of these Credit Ratings has been revised to stable from negative.
A.M says the ratings reflect Kenya Re’s balance sheet strength, which A.M. Best categorises as very strong, as well as its adequate operating performance, neutral business profile and weak enterprise risk management (ERM).
However, the downgrade is due to A.M’s concerns over the effectiveness of Kenya Re’s ERM in the face of expected business growth and increasingly sophisticated competition. Additionally, there are uncertainties related to the company’s ability to grow its capital resources at the same rate that it increases its revenue over the longer term.
“Kenya Re’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), is consistent with a strongest assessment; however, offsetting balance sheet strength factors include uncertainties related to the company’s natural catastrophe exposure and the financial system risk associated with Kenya’s financial markets. Although A.M. Best expects risk-adjusted capitalisation to remain at the strongest level over the longer term, the company is expected to face challenges in funding its expansion in its regional markets, should those markets continue to deliver high growth.” A.M Best notes.
