Coface South Africa accorded coveted AAA rating

International credit rating agency, Global Credit Ratings ("GCR"), has accorded Coface South Africa Insurance Company Limited (Coface ZA) a first time claims paying ability rating of AAA (triple A), the highest possible rating.

Coface ZA is a niche trade credit risk insurer, covering domestic and export credit risks. The company is a wholly owned subsidiary of one of the worlds top three trade credit management / insurance companies, Compagnie Francaise dAssurance pour le Commerce Exterieur, which has direct presence in 59 countries and representation in 93 countries worldwide. Although having operated in South Africa as an underwriting manager for more than a decade, Coface ZA was granted an insurance licence in 2005. Notwithstanding its short history as an underwriter, the company has already reported underwriting profits, while robust growth is expected going forward.

According to Jackie Swan, senior analyst at GCR, the explicit support provided by the insurers parent company, which is rated AA- Internationally by S&P, Aa3 by Moodys and AA by Fitch, was positively viewed. In addition, the companys extensive local experience, supported by its access to vast international credit risk data and expertise, serves as a significant competitive advantage. Cognisance was also taken of the substantial support provided by the insurers reinsurance programme, and in particular its stop loss arrangement.

Notwithstanding the above, Swan noted, that the highly cyclical nature of trade credit risk insurance implies a level of business risk. This is exacerbated by the intensification of competition and potential knock on effect to rates, which could place pressure on underwriting going forward. Furthermore, given the recent interest rate hikes (with further increases widely anticipated), the general credit environment is expected to deteriorate in the medium term.