Fitch Ratings has assigned African Risk Capacity Limited (ARC Ltd), the commercial subsidiary of the African Risk Capacity Group (ARC Group), an ‘Insurer Financial Strength (IFS) rating of ‘BBB+’ and a ‘Long-Term Issuer Default Rating (IDR) of ‘BBB’ with a stable outlook.
Announcing the rating on its official website, after having earlier communicated same to the ARC Group, Fitch indicated that “the ratings reflect the commitment and credit quality of ARC’s sponsors, as well as the company’s good business profile, very strong capitalisation and leverage….”
Continuing, Fitch stated that, ARC Ltd’s capital position is very strong, and a key strength for the rating level, adding that the company benefits from the treatment of the USD67 million of Class C members’ returnable capital as Tier 1 capital under the Bermudan Solvency regime; and as equity capital under Fitch’s Prism Factor-Based Capital Model (Prism FBM). As a result, ARC Ltd reported a Bermudan enhanced capital requirement (ECR) ratio of nearly 2500% at 31 March 2020, while the company’s score on Fitch’s Prism FBM was “Extremely Strong” at end-2019.
“Obtaining an industry rating is an important enabler for our strategy to access new business by taking on inwards reinsurance, thereby allowing us to better meet the needs of countries by supporting national agricultural insurance schemes and providing capacity to local insurance companies”, said Lesley Ndlovu, the CEO of ARC Ltd, while expressing his excitement at the Fitch BBB+ rating. “Considering that this is the first time ARC Limited is being rated, we are gratified for being ranked among the top-notch insurance companies in Africa. With only one notch lower than Africa Re, we are encouraged more than ever to leverage our competitive edge towards becoming the best disaster risk insurer in Africa in the service of our Member States”, Mr Ndlovu concluded.
ARC Ltd is funded by the UK Department for International Development (DFID) and the German Development Bank KfW.
Sharing his satisfaction with the rating, Ibrahima Cheikh Diong, the Group Director-General, ARC Group, agreed that a BBB+ ranking of ARC Ltd, by an internationally acclaimed agency like Fitch, should boost the faith of ARC stakeholders in the viability of its model relative to meeting set obligations to the Member States. “Our approach in providing sovereign disaster risk insurance coverage to African Union Member States is anchored on the mandate to ensure that vulnerable populations receive immediate support upon the trigger of the set parameters. Ultimately, we want to become the development insurer of choice for Africa offering multiple products; and a BBB+ by Fitch is a bold step in this quest”, said Mr Diong.
