Best Assigns ‘C++’, ‘b+’ Ratings to Russia’s Transsiberian Re

A.M. Best Co. has assigned a financial strength rating of “C++” (Marginal) and an issuer credit rating (ICR) of “b+” to Russia’s OJSC Transsiberian Reinsurance Corporation (Transsib Re) with a stable outlook.

“The ratings reflect Transsib Re’s position as a medium-sized company in the small but fast developing Russian reinsurance market and the company’s excellent financial performance,” said Best. “The main offsetting factor is the insufficient level of financial strength to support continued business expansion according to A.M. Best’s risk-based capital model.”

Best explained: “Transsib Re is a medium-sized company in the context of the domestic Russian reinsurance market, with gross written premiums of around RUB 1.1 billion ($38 million) in 2005. With a historical net retention ratio of around 30 percent, A.M. Best believes that Transsib Re’s potential for net premium growth during the next three years (at a rate of approximately 15 percent – 20 percent per annum – slightly faster than the domestic market) is likely to be constrained by significant capital pressures.”

The rating agency also noted, however, that “Transsib Re’s technical performance has historically been excellent, with combined ratios of around 90 percent.” Best said it “believes that despite these positive underwriting results and a comprehensive reinsurance program, the net exposures in respect of natural catastrophes are material enough to impact significantly Transsib Re’s capital position.”