AM Best affirms b++ to ASR Re, Bermuda

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AM Best has assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb+” (Good) to ASR Re Limited (ASR Re) (Bermuda).

ASR Re is a wholly owned subsidiary of ASR Holdings Limited (ASR) (Mauritius), the non-operating holding company of the ASR group. The outlook assigned to the Credit Ratings (ratings) is stable.

The ratings of ASR Re reflect ASR’s consolidated balance sheet strength, which AM Best assesses as very strong, as well as the group’s adequate operating performance, limited business profile and appropriate enterprise risk management. In addition, the ratings reflect the strategic importance of ASR Re to the ASR group.

ASR Re is the group’s Bermuda-based specialty reinsurer and will be the principal contributor of premium income. In addition to writing third-party reinsurance, ASR Re will provide reinsurance protection to its subsidiary Africa Specialty Risks Reinsurer (Mauritius).

ASR is a new entrant in the African corporate specialty reinsurance sector. The group has been capitalised initially with USD 20 million of common shareholders’ equity, drawn from a USD 50 million facility managed by Helios Investment Partners, a private equity investor and manager with a track record of investing in companies with an African focus. AM Best expects the remaining USD 30 million of committed capital to be drawn down over its startup five-year (2021-2025) business plan.

ASR is expected to maintain the strongest level of consolidated risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio, over its startup five-year business plan, taking into account AM Best’s additional capital requirements for new company formations. An offsetting factor in the balance sheet strength assessment is the small absolute size of ASR’s capital and surplus, by international standards; however, this is offset partly by the good credit quality of its retrocession panel and its small net line size.

In addition, ASR is exposed to the high levels of economic, political and financial system risks that are associated with its target operating environment in the African specialty reinsurance market. However, this is partially mitigated by robust risk management practices, good geographic diversification and a strategy to primarily reinsure assets of developed market corporates that have an African touchpoint.

The adequate operating performance assessment considers the group’s five-year business plan, taking into account its competitive environment and heightened execution risk during the startup phase. AM Best expects the group’s operating performance to rapidly improve in line with the five-year plan. This is supported by non-technical earnings from its managing general agent operations in London and Mauritius, through which the group’s business will be sourced.

In the initial years of operation, the group is reliant on several third-party capacity providers, some of which have multiyear agreements, to write business. As the group matures, ASR is expected to diversify the panel of capacity providers as well as grow its direct book of business.

AM Best expects ASR to face competition from well-established global reinsurers in the African corporate specialty reinsurance market. However, AM Best expects the group’s competitive position to be enhanced through the agile and bespoke services provided cedants and the establishment of strategic partnerships with local market participants.

Furthermore, the group has a senior management and underwriting team in place that has extensive experience in the targeted classes of business and operating environment. In AM Best’s view, this increases the likelihood of market acceptance and successful execution of the group’s business plan.

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