The African Risk Capacity (ARC), a provider of parametric disaster insurance products to countries and now other entities in Africa, is also planning to further expand its risk pool by underwriting inwards reinsurance thanks to securing a rating from Fitch.
African Risk Capacity Limited (ARC Ltd), the commercial insurer subsidiary of ARC Group, has secured an ‘Insurer Financial Strength (IFS) Rating of ‘BBB+’ and a ‘Long-Term Issuer Default Rating (IDR) of ‘BBB’ from rating agency Fitch, both having a stable outlook.
While the rating is an important recognition of ARC’s position as a sovereign parametric insurer, the company is looking to expand.
As we reported earlier this week, the African Risk Capacity is looking to further expand its client base to include non-sovereign actors, as it looks to grow and diversify its portfolio of risks.
The larger and more diverse the ARC risk pool becomes, the more efficiencies and economies of scale it can recognise, to the benefit of African nations, not least through reinsurance related efficiencies.
It has now become clear that the ambitions to grow the risk pool are also spreading to where in the market chain ARC accesses risk, as the company will look to underwrite inwards reinsurance as well.
“Obtaining an industry rating is an important enabler for our strategy to access new business by taking on inwards reinsurance, thereby allowing us to better meet the needs of countries by supporting national agricultural insurance schemes and providing capacity to local insurance companies,” explained Lesley Ndlovu, the CEO of ARC Ltd.
“Considering that this is the first time ARC Limited is being rated, we are gratified for being ranked among the top-notch insurance companies in Africa. With only one notch lower than Africa Re, we are encouraged more than ever to leverage our competitive edge towards becoming the best disaster risk insurer in Africa in the service of our Member States,” Ndlovu added.
Ibrahima Cheikh Diong, Group Director-General of ARC Group added, “Our approach in providing sovereign disaster risk insurance coverage to African Union Member States is anchored on the mandate to ensure that vulnerable populations receive immediate support upon the trigger of the set parameters. Ultimately, we want to become the development insurer of choice for Africa offering multiple products; and a BBB+ by Fitch is a bold step in this quest.”
While Fitch Ratings assessed ARC Ltd’s portfolio diversification as only limited, the company is clearly seeking to build on this with its expansion to offer parametric insurance to non-sovereign entities and the newly announced ambitions to write inwards reinsurance as well.
By becoming a reinsurer to national agricultural schemes in Africa, as well as to insurers operating in the region, it seems ARC may also begin to underwrite more than just parametric coverage as well.
It’s possible the company could look to write indemnity based reinsurance products, as well as reinsurance for other index-insurance schemes.
This should enable it to add significant growth to its risk pool over the coming years, which will be largely weather and catastrophe linked in terms of perils.
Which of course makes the ARC reinsurance and also retrocession program an increasingly attractive opportunity for the insurance-linked securities (ILS) funds of the world, meaning ARC should be able to access a wide selection of risk capital sources for the protection of itself and its customers.