Kuwait Reinsurance Company's underwriting discipline and prudent risk selection are expected to support continued improvements in its operating metrics, says AM Best.
The reinsurer improved its return-on-equity ratio which increased year-on-year from 9.3% in 2019 to 14.4% in 2023, notes the global credit rating agency.
Kuwait Re’s earnings were underpinned by robust underwriting margins and substantial development of reserving buffers, which has tempered technical earnings in recent years due to its prudence.
Outlooks revised to ‘Positive’
AM Best has revised the outlooks of Kuwait Re to ‘Positive’ from ‘Stable’ and affirmed the reinsurer’s Financial Strength Rating of 'A-' (Excellent) and Long-Term Issuer Credit Rating of ‘a-’ (Excellent).
These credit ratings reflect Kuwait Re’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile, and appropriate enterprise risk management. The ratings factor in no rating enhancement or drag arising from the company’s majority ownership by Al Ahleia Insurance Company.
The ‘Positive’ outlooks reflect a sustained improvement in Kuwait Re's operating performance.
Balance sheet strength
Kuwait Re’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s balance sheet strength is supported by a track record of internal capital generation, along with prudent reserving practices and good liquidity to support operations. A partially offsetting factor is Kuwait Re’s modest holdings of higher-risk assets, with its real estate and equity portfolio equating to approximately 13% of total investments at year-end 2023, which exposes its capital base to potential volatility.
Business profile
Kuwait Re’s business profile assessment reflects its diversification by geography and product offering. The company’s operations span the Middle East, North Africa, Asia-Pacific and Central and Eastern Europe, where the company provides proportional and non-proportional cover to its cedants. Kuwait Re generated insurance revenue of KWD71.4m ($233.0m) in 2023, representing a combined (non-life & life) growth of 23% compared with 2022, driven in part by favourable reinsurance market conditions in its core markets.