Moody’s Investors Service has today assigned Caa3 Insurance Financial Strength (IFS) ratings to Klapton Reinsurance Limited (KlaptonRe), along with a stable outlook.
KlaptonRe is a new reinsurer, based in Zambia, with a focus on treaty and facultative reinsurance business across Africa, Asia, the Middle East and Latin America.
The reinsurer is affiliated with – through common ultimate ownership – Klapton Insurance Company (KIC), an insurer and reinsurer registered in the Autonomous Island of Anjouan, Union of Comoros and formed in 2005.
Moody’s explained that KlaptonRe’s ratings reflect its standalone credit profile as well as the constraint deriving from its linkages to the credit profile of the Government of Zambia as a result of its domicile and its significant cash and investment holdings in banks and government debt in Zambia.
The company’s standalone credit profile reflects its good business profile, with exposures that are well diversified by cedant and geography, and a market position that benefits from long-standing relationships with cedants and brokers in its regions of operation.
Additionally, while KlaptonRe is a new entity, Moody’s says that it benefits from its association with KIC and an agreement to transfer KIC’s existing reinsurance business to KlaptonRe on a renewal basis.
The business being transferred to KlaptonRe has performed well, with 5 year average combined ratio of 51.5% from 2016 to 2020, and Moody’s expects KlaptonRe’s profitability to benefit from the good performance of this business.
Analysts added that the stable outlook for KlaptonRe reflects the stable outlook for Zambia, and the expectation that the company will successfully transfer renewing reinsurance business from KIC, and maintain good capitalisation sufficient to help it absorb potential stress at the sovereign level.