AMSTERDAM–(BUSINESS WIRE)–AM Best confirmed the financial strength rating (FSR) of A+ (Superior) and the issuer’s long-term credit rating (long-term ICR) of “aa” (Superior) from Caisse Centrale de Réassurance (CCR) ( France). At the same time, AM Best confirmed the FSR of A (Excellent) and the Long Term ICR of “a” (Excellent) of CCR RE (France). The outlook for these Credit Ratings (ratings) is stable.
CCR’s ratings reflect the strength of its balance sheet, which AM Best assesses as very strong, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management (ERM). The ratings also take into account, in the form of a rating lift, the explicit unlimited guarantee provided by the French Republic to the activities of CCR supported by the State.
CCR’s balance sheet strength rating reflects the company’s strongest risk-adjusted capitalization, as measured by Best’s capital adequacy ratio (BCAR). CCR’s capital position is supported by significant offsets and special reserves, which allow it to absorb potential losses from its peak exposures to natural disasters, terrorism and other exceptional risks. The balance sheet strength rating also reflects CCR’s liquid and high-quality investment portfolio, as well as its prudent provisioning practices.
AM Best considers CCR’s long-term operating performance to be adequate. Results tend to be volatile given the nature of the business written; however, the company manages its results through the use of its large equalization reserves, which are bolstered in mild years and partially released following higher claims activity. In 2021, the business experienced fewer natural disasters than in previous years, resulting in a combined ratio of 67% (as calculated by AM Best, before movement of the equalization reserve). The 2021 results were further enhanced by strong results on the state-backed trade credit insurance line, which saw positive reserve development on seasoned cohorts. Since 2017, however, major weather-related natural disasters have generated many heavy loss years, resulting in an average loss ratio of 108% for the five-year period ending in 2021.
The favorable assessment of CCR’s business profile reflects the company’s role in the French public reinsurance system and its unique position as the main reinsurer of natural catastrophe risks underwritten in France, with an estimated market share of more than 90 %. CCR’s market offer of a 50% quota, supplemented by an optional and unlimited stop loss agreement, is considered a competitive advantage.
CCR RE’s ratings reflect the strength of its balance sheet, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM. The ratings also take into account, in the form of a rating lift, the strategic importance of CCR RE for CCR.
CCR RE’s balance sheet strength rating reflects its strongest risk-adjusted capitalization, as measured by BCAR. The valuation also takes into account the company’s low dependence on reinsurance, prudent reserving practices and its liquid and good quality investment portfolio. CCR RE has demonstrated its financial flexibility in recent years, with the continued reissue of its ILS sidecar, 157 Re, since 2018 and the issuance of €300 million of subordinated debt in 2020. Financial flexibility remains constrained ; however, by the clear separation of activities and capital between CCR and CCR RE.
CCR RE has been profitable since its creation as a stand-alone company in 2016, with results coming from technical performance and investments. Since its inception, the company has experienced strong growth, with net written premiums growing at an average annual rate of 14% for the five-year period ending in 2021 (30% in 2021).
In the longer term, growth should remain positive, albeit moderate. Since 2016, technical performance has trended upwards as the company has streamlined its underwriting activities. AM Best expects this improvement to continue as the company continues to grow its business. After a year where technical results were depressed by the effect of COVID-19, technical performance was positive in 2021 (2021: €14.5m, 2020: -€14m).
CCR RE’s neutral business profile is supported by its established presence in the international reinsurance market, with the company writing a well-diversified underwriting portfolio and benefiting from the long-established CCR brand.
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