African Risk Capacity Limited (ARC), the commercial subsidiary of the African Risk Capacity Group (ARC Group), has secured an IFS ‘BBB+’ with Stable Outlook from Fitch, allowing the firm to gain access to new business by taking on inwards reinsurance.
ARC’s Chief Executive Officer described the industry rating as an important enabler for the company’s strategy, allowing them to better meet the needs of countries by supporting national agricultural insurance schemes and providing capacity to local insurance companies.
Fitch says the ratings reflect the commitment and credit quality of ARC’s sponsors, as well as the company’s good business profile and very strong capitalisation and leverage.
ARC is funded by the UK Department for International Development and the German Development Bank KfW.
Fitch’s assessment of these funders’ willingness and ability to support ARC results in a one-notch uplift to its standalone credit profile.
Fitch also notes that ARC’s portfolio diversification is still limited, currently offering a single parametric insurance product covering drought risk.
Geographic diversification is moderate with the 2019/20 risk pool covering only 11 African Union Member States out of a possible 34, with the number of members having been volatile in prior years.
Fitch expects ARC’s business profile to improve through increased diversification as more countries sign up to the ARC project attracted by a broader range of products.
