S&P Global Ratings has decided to upgrade the ratings of CCR Re, based on the expectation that the reinsurer will be able to structurally reduce the volatility of its technical results and overall profitability over the coming years.
The rating agency has revised the stand-alone credit profile of CCR Re to ‘a–’ from ‘bbb+’, while affirming its ratings at ‘A-‘.
The positive outlook on these ratings indicates the potential for CCR Re to benefit from stronger financial support or credit enhancements from the future ownership structure, analysts added.
Despite its relatively small size, which limits its pricing power compared with its bigger competitors, CCR Re is seen as having a wide geographical diversification in Europe, Asia, Canada, the Middle East, and North Africa, as well as solid diversification among life and non-life reinsurance products.
These factors have enabled it to mitigate the negative effects of a tough environment over the past few years, S&P explains.
In 2021, CCR Re reported a strong improvement in its technical results while continuing to expand with a combined ratio of 96.6%, and analysts expect the company to post combined ratios of about 96% on average over the next few years.
“We believe CCR RE’s capital and earnings will remain at very strong levels,” S&P concluded. “Our assessment rests on the view that CCR RE is committed to maintaining a level of capital adequacy above the ‘AAA’ level under our methodology, supported by the CCR group’s announcement on Sept. 20, 2022, that CCR RE will receive a €200 million capital increase as part of a future change in ownership and to finance its growth plan.”
S&P also acknowledged CCR RE’s prudent approach of building reserves, which leads to a surplus compared with the best estimate of reserves.
However, its favourable outlook was tempered by the potential for the group’s exposure to losses from extreme weather to generate capital and earnings volatility.
