French reinsurer’s ratings removed from under review after eurozone resolutions
AM Best Europe has removed from under review with negative implications and affirmed the financial strength rating of A++ (Superior) and the issuer credit rating of “aa+” of Caisse Centrale de Reassurance (CCR) (France). The outlook assigned to both ratings is negative.
The rating actions reflect the rating agency’s view that some stability has been reached across the eurozone due to recent developments and policy actions.
Nevertheless, underlying concerns remain with regards to the weak economic conditions and fiscal imbalances that still exist in the area, noted Best.
It believes CCR’s ratings fundamentals remain sound with only a marginal investment exposure to European peripheral countries and expects the company’s risk-adjusted capitalisation to stay at an excellent level in the next few years.
However, CCR’s ratings factor in the explicit unlimited guarantee provided by the Republic of France to its state-backed business. The negative outlook reflects the continued pressures on the creditworthiness of the Republic of France.
Although AM Best expects CCR’s 2011 performance to be negatively impacted by the Thai floods and New Zealand earthquake, the company’s risk-adjusted capitalisation is expected to remain very strong, while its operating performance is expected to remain sound given its balanced portfolio.
Despite the high volatility of natural catastrophe and other lines of business written by CCR the impact of a catastrophic event on CCR’s balance sheet can be effectively absorbed by its equalisation and other special reserves, and should the latter prove insufficient, by the unlimited state guarantee.
Upward rating pressures are unlikely at this point.
Negative rating actions could occur if the level of explicit support given to CCR by the French state or the creditworthiness of the Republic of France were to change.