AM Best has affirmed the financial strength rating of B++ (Good) and the long-term issuer credit rating of “bbb+” (Good) of Bermudian-based ASR Re Limited.

The outlook of these credit ratings is stable.

The ratings reflect ASR 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.

ASR Re is a wholly-owned subsidiary of ASR Holdings and is the primary risk carrier within the ASR group, a new entrant in the African corporate specialty reinsurance market.

The group was capitalised initially with $20 million of common shareholders’ equity, drawn from a $50 million facility managed by Helios Investment Partners, a private equity investor and manager.

A further $20 million was drawn in 2021, and AM Best expects the remaining $10 million of committed capital to be drawn down over the short to medium term. Approximately $28 million was used to capitalise ASR Re in 2021.

AM Best expects ASR Re’s risk-adjusted capitalisation, as measured by Best’s capital adequacy ratio, to be maintained at the strongest level over the medium term, taking into account AM Best’s additional capital requirements for new company formations.

An offsetting factor in the balance sheet strength assessment is the small absolute size, by international standards, of ASR Re’s capital and surplus. However, this is offset partly by its relatively small net line size and the good credit quality of its retrocession panel.

In addition, ASR Re is exposed to the high levels of economic, political and financial system risks that are associated with operating in the African specialty reinsurance market, although this is mitigated partially by good geographic diversification.

The adequate operating performance assessment considers ASR Re’s results in 2021 and projected performance per its business plan, taking into account the competitive environment and heightened execution risk during its start-up phase.

ASR Re is a Bermudian-domiciled reinsurer, underwriting African reinsurance business sourced by affiliated managing general agents owned by the ASR group.

In its initial years of operation, the group is reliant on third-party capacity providers to write business. As the business matures, the group is expected to diversify the panel of capacity providers and grow its direct book of business, reducing this dependence.

The ASR group is expected to face competition from well-established peers in its target markets.

The group has a senior management and underwriting team in place that has good experience in the targeted classes of business and operating environment.

In AM Best’s view, this increases the likelihood of market acceptance and successful execution of the group’s business plan.