Best Affirms Caisse Centrale de Reassurance ‘A+’ Rating

A.M. Best Co. announced that it has affirmed the financial strength rating of “A+” (Superior) and the issuer credit rating of “aa” of France’s Caisse Centrale de Reassurance (CCR) with a stable outlook.

“The ratings reflect CCR’s unique position as the only French reinsurer providing unlimited cover for catastrophic perils, nuclear and terrorist risks,” said Best. It added that in its belief “the company will continue to benefit from the explicit support of the French State (CCR’s shareholder) in the form of a stop-loss in the medium term despite the ongoing review of the current natural catastrophe insurance cover.”

Best said it “expects CCR to maintain its superior risk-adjusted capitalization as the company’s aggregate catastrophe losses are capped at an agreed level through the stop-loss agreement with the French State. Despite the increasing number of natural catastrophes in recent years, CCR is continuing to build up its equalization reserve (€ 680 million ($ 858 million) in 2005); however, this also implies a higher risk exposure.”

Best also noted that “despite CCR’s efforts to restructure its open market book of business, technical results remain disappointing with a slight deterioration in the combined ratio in 2005 (106 percent compared with 104 percent in 2004).” Best added that it “does not expect a significant improvement in underwriting results in 2006 as CCR has limited influence on terms and conditions, and as a consequence, it “believes that CCR may find it difficult to achieve a target return on equity of 8 percent by 2007.”

In conclusion, Best said it “believes that underwriting results of the State-backed business (currently €760 million ($960 million) of premiums) are likely to remain volatile given the nature of risks CCR is reinsuring and its varying annual aggregate exposures. However, this book of business has remained very profitable in the last two years, and A.M. Best also expects positive results in 2006.”