Fitch has revised African Risk Capacity (ARC) Limited’s outlook to Positive from Stable and has also affirmed its IFS rating at BBB+.
The credit rating agency says that this outlook revision reflects ARC Limited’s “strong progress in meeting its development objectives, which if sustained, could support a stronger company profile assessment within the next two years”.
“In Fitch’s view, the improvement in ARC’s premium base, risk pool and claim pay-outs enhances the company’s geographic diversification, franchise and operating scale. In addition, the improved reach of the company’s development activities is likely to further increase its importance to sponsors.”
Lesley Ndlovu, ARC Limited CEO, said: “We are delighted with this revision of our outlook to Positive which reflects the work we have done to raise our company profile and improve portfolio diversification.”
“We are confident that the support from our sponsors will only grow as we expand ARC Limited’s impact on the African continent in terms of our development activities and the number of parametric insurance pay-outs we have been making in 2022 to respond to cyclones and droughts.”
Another reason cited for the revision include support from German development bank KfW and the British Foreign, Commonwealth & Development Office.
Fitch says ARC’s key strength, however, is its capital position: “We regard the returnable capital provided by KfW/BMZ and the FCDO of USD70 million at end-2021 as fully loss-absorbing, and consequently treat it as equity capital when assessing capitalisation and leverage.”
“On this basis, ARC scored ‘Extremely Strong’ on Fitch’s Prism Factor-Based Capital Model based on end-2021 figures, unchanged from 2020. Fitch expects that further capital support could be made available as ARC continues to achieve its development goals. ARC’s regulatory capitalisation is strong, with a Bermuda enhanced capital requirement ratio of 796% at end-2021 (2020: 1,628%).”
