Africa News - Morocco: Reinsurers to make provisions based on retrocessionaire ratings
Source: Middle East Insurance Review | Jan 2016
Reinsurers in Morocco are to make technical provisions based on the Standard & Poor’s (S&P) ratings of their retrocessionaires (foreign reinsurers), according to the Department of Insurance and Social Welfare (DAPS).
The Department has established a scale that domestic reinsurers must observe. Net claims are accepted as cover by up to 100% of technical reserves for approved retrocessionaires in Morocco or those whose credit rating is at least ‘A-’, reported L’Economiste. The threshold is up to 70% for claims where ratings are lower than ‘A-’ and at least ‘BBB’. For claims against reinsurers which do not have credit ratings for over 18 months or with a rating below ‘BBB-’, the threshold drops to 0%.
The decision, which applies to financial statements at 31 December 2015 and later, said that credit ratings to be considered are those granted by S&P. If the ratings are accorded by other agencies, the reinsurance undertaking shall take into account equivalence in ratings. Where ratings are from several agencies, the lowest rating given in the last 18 months will be adopted.
An evaluation of the financial risk is required, as well as stress tests involving the impact of changes in interest rates and stock market prices on assets and liabilities.