Kenya Re has a fair ability to meet its insurance obligations and pay its secured creditors, according to a new assessment by ratings agency AM Best.
Ratings are relied on by customers to gauge the financial strength of underwriters from which they want to take insurance contracts.
Insurance companies in a weak financial position are less likely to compensate clients, especially when major disasters strike.
In terms of financial strength, the Nairobi Securities Exchange-listed firm received a rating of B (Fair).
This means that, in the opinion of AM Best, the reinsurer has a fair ability to meet its ongoing insurance obligations. The financial strength, however, is vulnerable to adverse changes in underwriting and economic conditions.
The rating is three steps below the top rating of A+ which is assigned to firms with the strongest balance sheets.
On ability to repay secured creditors, Kenya Re is rated at bb+. This means that it has a fair capacity to repay its senior debt. The rating is four steps below the highest mark.
The rating is vulnerable to adverse changes in industry and economic conditions, according to AM Best ratings scale.
Kenya Re covers primary insurers in Kenya and other African markets. It has a privileged market access in Kenya, with compulsory cessions of 20 percent from the local market.
“The company’s risk management framework is considered to be evolving, and its risk management capabilities are weak when compared with its risk profile,” the ratings firm said in a statement.
“AM Best expects ongoing improvement in risk management to support better underwriting performance in the medium to long term.”
Kenya Re reported a 12.4 percent drop in net earnings in the half year ended June when it registered a surge in claims and operating expenses. Its net profit in the review period stood at Sh1 billion, down from Sh1.2 billion the year before.