The Kenya Reinsurance Corporation (Kenya Re) is looking for a ratings agency, to assess its current creditworthiness as it seeks to bolster its standing in the reinsurance market where financial strength is key in winning major business.
The reinsurer, which is 60 percent owned by the Kenyan government, says the rating exercise will cover the operations of its head office in Kenya as well as its three subsidiaries in Cote D’Ivoire, Zambia and Uganda.
“This exercise is in line with the corporation’s strategic objective of securing a rating that reflects our strong financial fundamentals, creditworthiness, robust business model, and long-term growth prospects,” says Kenya Re in a tender whose deadline for receiving bids is January 14.
A reinsurer’s credit rating is the opinion of an independent agency regarding the company's financial strength and ability to pay claims coming from primary underwriters. A strong rating is an indication that a reinsurer can settle claims without struggle.
Kenya Re has no debt and its potential liabilities mostly comprise of the risks it has covered in its policies.
Kenya Re underwrites more than 200 general and life insurance companies spread over 50 countries, mainly in Africa, Middle East and Asia.
It hopes to build on the previous ratings from AM Best and GCR Ratings.
The scope of the ratings agency will include undertaking a detailed assessment of Kenya Re’s current credit score and propose “practical enhancements” accompanied by a relevant mitigation plan.
“Create awareness across the corporation on the credit rating methodology and provide practical recommendations on how to improve the rating score during annual rating meetings. The training should be enhanced through factual case studies derived from the consultant’s past or current clients in the reinsurance industry,” says Kenya Re.
In August 2024, the world’s largest credit rating agency for the insurance industry AM Best affirmed Kenya Re’s financial strength rating of B (fair) and the long-term issuer credit rating of “bb+” (fair) with a stable outlook. AM’s lowest rating is D (poor), followed by C (weak), C+ (marginal), B( fair), B+ (good), A (excellent) and A+ (superior).
In July 2024, GCR Ratings affirmed Kenya Re’s international and national scale financial strength ratings of B and AA+ (KE), respectively. Both ratings were maintained on a stable outlook.
Kenya Re net profit for the year ended December 2023 grew by 41.6 percent to Sh4.97 billion from Sh3.5 billion in the prior year, helping it to raise its dividend per share to Sh0.30 totaling Sh839.9 million from Sh0.20 amounting to Sh560 million.
The reinsurer followed it up with a bonus issue that saw shareholders get one share for each held, triggering a gain of the share price at the Nairobi Securities Exchange.
Last year’s bonus shares followed that of June 2019 where shareholders were given three shares for each one share held as it sought money to continue underwriting business in Egypt where the regulator had revised the capital requirement for reinsurers.