AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Compagnie Commune de Réassurance des Etats Membres de la CIMA (CICA-RE) (Togo). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect CICA-RE’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and marginal enterprise risk management.

CICA-RE’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which was at the strongest level at year-end 2022, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects CICA-RE’s risk-adjusted capitalisation to remain comfortably above the minimum required for the strongest assessment prospectively, with capital buffers sufficient to absorb underwriting risks arising from the company’s growth plans. CICA-RE’s balance sheet strength assessment also factors in its good financial flexibility, demonstrated through successful capital raises from existing and new shareholders, which have increased paid-up capital to XOF 60 billion (USD 98 million) at year-end 2022 from XOF 32 billion (USD 56 million) at year-end 2018. CICA-RE holds a well-diversified investment portfolio by asset type and geography, however, assets are concentrated in the Conférence Interafricaine des Marchés d’Assurances (CIMA) region.

CICA-RE has a track record of adequate operating performance, with a five-year (2018-2022) weighted average return on equity of 9%. Over this period, the company has reported robust technical performance, with a weighted average combined ratio of 94% (as calculated by AM Best), and an investment yield of 5%. CICA-RE’s underwriting profitability primarily reflects the underlying performance of insurance markets in the CIMA region and generally profitable open-market business generated outside of the CIMA zone. Prospectively, AM Best expects continued robust underwriting performance, complemented by good investment income.

CICA-RE’s neutral business profile assessment reflects its strong market position in the CIMA region, where its profile is supported by compulsory cessions on reinsurance and direct insurance business and established direct relationships with local cedants. Following revisions to the legal cessions structure in the CIMA region in 2020, CICA-RE has achieved significant portfolio growth, with gross written premium (GWP) increasing to XOF 106 billion (USD 173 million) in 2022, compared with XOF 64 billion (USD 109 million) in 2019. In 2022, the company generated 50% of GWP from the CIMA region, including legal cession business, with the remaining conventional open-market business originated from Africa, Asia, the Middle East and Latin America.

CICA-RE is exposed to the elevated economic, political and financial system risks associated with operating in the CIMA region, which is viewed as a partially offsetting factor to the ratings.

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