Global Credit Ratings (GCR) has re-affirmed its rating on the claims paying ability of Coface South Africa Insurance Company Ltd (Coface ZA) of AA+(ZA) (double A plus).
GCR said the rating reflects the explicit guarantee provided by Cofinpar, a 100% owned subsidiary of Coface SA, as well as a letter of continuing support from the parent company.
“The insurer garners significant capital support through the reinsurance capacity provided by its parent. The strategic relationship with the parents also provides significant access to technical expertise and operational platforms, enhancing risk management practices,” said GCR in a statement.
According to GCR, Coface ZA’s international solvency margin is forecast to decline below the 100% mark in F12, due to an increase in net retention under the quota share agreement. Thereafter, solvency is envisaged to recover to historical levels (above 100%) over the medium term, underpinned by strong internal profit generation.
Going forward, profitability has improved and is expected to be sustained, underpinned by stringent underwriting criteria applied. This notwithstanding, given the exposure to a relatively long claims settlement process, combined with the macro-economic credit conditions, volatility in the earned loss ratio is expected to continue going forward. The insurer has also instituted a highly conservative asset management strategy, which underpins sound liquidity levels.
An upward movement of the rating or outlook could develop should the international rating of the parent company change positively. A downgrade may arise if the explicit guarantee and/or letter of comfort provided is withdrawn or amended, or the rating of the guarantor is revised downwards. Furthermore, a significant and sustained reduction in capitalisation and/or deterioration in Coface ZA’s business position could exert negative ratings pressure.
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