By Patience Saghana
As local insurers struggle to catch the attention of A.M.Best and Standard & Poor’s ratings to attract the magnet of Nigerian National Petroleum Corporation (NNPC)’s insurance accounts, the two NNPC accredited rating agencies are beefing up their rating assessments of financial institutions in Africa.
The insurance regulatory environments in most of Sub-Saharan Africa, the agencies agreed are in a stage of development while trying to comply with international standards.
A.M. Best s rating assessment for countries and financial institutions are hinged on Country Risk Tier (CRT) which reflects three categories of risk: Economic, Political and Financial System Risk whilst Standard & Poor’s rate insurance companies’ Financial Strength to enable buyers of insurance, risk managers and employee benefit administrators, this type of rating provides details on an insurance organization’s ability to pay its policies and contracts.
Insurance brokers and agents may also use these ratings to meet due diligence and disclosure requirements
Nigeria’s Country Risk Tier (CRT) is 5; Kenya, 5; South Africa, 3; Ghana, 5; Morocco, 4 and Tunisia, 4. Nigeria’s CRT-5, the agencies analysed, exhibits high economic risk and very high political and financial system risk. Violence and corruption weigh on Nigeria’s ability to increase the wealth of the population.
The economy benefits from Nigeria’s oil reserves thus allow for strong economic growth and healthy international currency reserves as well as government and trade surpluses.
The majority of countries in Sub-Saharan Africa are categorized as CRT-5, with the exceptions being South Africa at CRT-3 and Mauritius at CRT-4.
The region as a whole is plagued with violence, crime, malnutrition and corruption, with few of the countries enjoying economic prosperity. In some cases, the region is home to some of the most economically-challenged countries in the world.
Meanwhile, insurance companies in the country are presently pushing to be rated by both A.M.Best and Standard & Poor’s. Africa Re which had already been rated twice by A.M. Best got A- from S & P’s as a result of its strong competitive position across the continent; strong operating performance based on exceptional stability and strong capitalization.
Continental Reinsurance Plc has also been rated BB+ by AM Best thus affirmed the Nigeria’s reinsurer’s financial strength whilst Leadway Assurance Company which led the NNPC-CIP for 2008/2009 got B- from as a result of the insurer’s financial muscle.
However, A.M.Best downgraded the financial strength rating of International Energy Insurance to C++ (Marginal) from B (Fair) and the issuer credit rating to ‘b+’ from ‘bb+’