ZEP-RE’s exposure to riskier markets earns Stable Outlook upgrade

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GCR Ratings (GCR) has upgraded the national scale claims-paying ability rating assigned to ZEP-RE (PTA Reinsurance Company) to AAA(KE) up from AA+(KE), with the outlook accorded as stable.

In a statement, GCR Ratings noted that ZEP-RE’s new rating was a function of the reinsurer’s exposure to comparatively riskier markets, counterbalanced by support through preferential treatment and healthy membership strength and diversity.

“The reinsurer’s mandate is fairly strong, given its position as an established reinsurer within the Common Market for Eastern and Southern Africa (“COMESA”) region, noting the potential for improvement in status and diversity. Furthermore, GCR views the financial profile to be sound, supported by solid capitalization and strong liquidity, somewhat offsetting inherent earnings pressures,” GCR said in a statement.

“The Stable Outlook reflects expectations that the reinsurer will maintain very strong capitalization, strong liquidity and intermediate earnings. Furthermore, we also expect that the reinsurer will continue to gradually build its status in target markets over the medium term, while the business profile is not expected to change materially over the outlook horizon.”

GCR noted that the operating environment assessment was partially diluted by the reinsurer’s geographical exposure to relatively riskier sovereigns in line with its mandate and earnings volatility.

“This notwithstanding, ZEP-RE’s credit profile derived uplift from a fairly diversified membership base, coupled with continued preferential treatment in the form of mandatory cessions and tax exemptions. More positively, the reinsurer’s retrocession protection is viewed to somewhat mitigate a degree of earnings volatility,” GCR said.

Highest rating

Speaking on the new ratings ZEP-RE Chief Executive Officer Hope Murera said the rating upgrade reflects the firm’s commitment to drive greater insurance penetration across Africa, as mandated by its foundation by Common Market for Eastern and Southern Africa (COMESA).

“We are extremely proud to have received this rating upgrade and of the signal it sends to our stakeholders across the continent. It is fitting to receive this rating upgrade just a few days after celebrating not only the 25th anniversary of COMESA but also the official opening of our business park in Lusaka, Zambia, which is our biggest infrastructure investment as a company outside of our Nairobi headquarters,” Murera said.

ZEP-RE Chief Risk Officer Deniese Imoukhuede said, “the AAA rating is the highest rating that can be achieved on the national rating scale and hence demonstrates the hard work we have put in to secure this milestone.”

Focused on the COMESA region, ZEP-RE is the largest supranational reinsurer, with gross premiums sourced from more than six significant markets with Kenya accounting for a majority 40 per cent of gross premiums.

Collaborations and technology adoption

To improve insurance uptake, ZEP-RE is collaborating with Kenya’s insurance industry to aggressively embrace technology and help expand access to insurance services.

Speaking at an insuretech forum held in Nairobi in September last year, Murera said that the insurance industry is ripe for innovation and the adoption of technology to achieve savings and efficiency is long overdue.

“The insurance industry the world over is undergoing disruption. Through the use of technology, the industry has an opportunity to embrace analytics further to come up with customized products that meet user requirements, new product development to expand and grow the pie as well as improve efficiencies that will lower distribution costs making insurance more accessible to all,” she said.

To increase insurance penetration in the COMESA region and the continent at large, Murera said that ZEP-RE aims to use the different facets of technology to deliver its mandate.

ZEP-RE’s Chief Information Officer Alexio Manyonde said they have mobilised a number of start-ups and innovators in the insurance space.

“Our ultimate goal is to pair tech innovators with insurance service providers as a means of starting the journey of development, mentorship, partnerships and joint development initiatives with the ultimate goal of, actualising and commercialising of ideas,” Manyonde added.

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