AM Best Affirms Credit Ratings of Bosna Reosiguranje d.d. Sarajevo
AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of "bbb-" (Good) of Bosna Reosiguranje d.d. Sarajevo (Bosna Re) (Bosnia and Herzegovina [BH]). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Bosna Re's balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
Bosna Re's balance sheet strength is underpinned by its risk-adjusted capitalisation, which is expected to remain at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR), supported by good internal capital generation and a well-rated retrocession panel. The company's investment portfolio, which is concentrated in domestic assets, remains its greatest source of capital consumption. Bosna Re's concentration to BH exposes it to the associated elevated levels of economic, political and financial system risk. Offsetting rating factors also include Bosna Re's high dependence on retrocession and relatively small capital base, which provides only a limited capital buffer in absolute terms to protect against adverse events.
Bosna Re has a track record of adequate operating performance, with profits stemming from both the underwriting and investment activities. Technical performance has improved in recent years, as evidenced by combined ratio of 93.7% in 2021, compared with the five-year (2017-2021) weighted average combined ratio of 95.2%, as calculated by AM Best. AM Best expects prospective earnings to continue increasing modestly, as the company grows its topline whilst maintaining its cautious underwriting strategy, which focuses on careful risk selection and a comprehensive use of retrocession protection.p> Bosna Re benefits from its dominant market position in BH, being the only domestic reinsurer licensed to write life and non-life insurance. The company remains the leading domestic reinsurer, with a market share in excess of 70% based on 2021 gross written premiums (GWP). Offsetting factors in the company's business profile assessment include its highly concentrated underwriting portfolio, with half of GWP derived from its top three cedants, and its limited geographic diversification (only 6% of business emanating from abroad in 2021). In AM Best's view, the high barriers to entry and the company's market position provides some protection against the impact of higher country risk associated with BH.
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