The credit rating of JSC RNRC (hereinafter, the Company, or RNRC) is based on the Company’s strong business profile and very strong financial profile along with its high-quality management, as well as the very high probability of extraordinary support being provided by the state.
RNRC is a specialized reinsurance company established in accordance with Article 13.1 of Federal Law No. 4015-I “On insurance business in the Russian Federation” dated November 27, 1992. The Company was established to provide additional protection to proprietary interests amid international sanctions. In accordance with the law, the Company may act as a party to the majority of outgoing reinsurance contracts concluded by Russian insurance companies (mandatory cession).
key assessment factors
The strong business profile stems from the Company’s stable position in the insurance market and strong operating performance. Against the backdrop of restrictions imposed on the transfer of insurance risks to companies in a number of foreign countries, as well as an increase in the share of mandatory cession transferred to RNRC, the Company remains the sole reinsurer that is able to cover a full range of Russian insurance risks. According to ACRA’s criteria, RNRC’s client base diversification is medium. The diversification assessment is constrained by the portfolio’s strong concentration on certain market participants, although this is offset by the substantial geographic and industry diversification of the insurance risks of these companies. ACRA maintains a high assessment of the quality of the Company’s product range, since RNRC possesses underwriting expertise across almost all significant types of insurance and reinsurance. The uniqueness of the Company allows its service distribution system to be assessed as extremely reliable.
The average value of the combined loss ratio (CLR) taking into account previous periods continues to be less than 1, however, ACRA notes that the CLR grew in 2022 and 2023. Given the CLR’s volatility, which is characteristic of reinsurers, the Agency maintains its operational efficiency assessment at a comfortable level. However, if the CLR remains sustainably high the assessment may be downgraded, which may affect the Company’s standalone creditworthiness assessment (SCA). The projected growth of RNRC’s premiums is expected to match the market average in the medium term.
The Company’s very strong financial profile is based on high capital adequacy, high asset quality, and strong liquidity. ACRA notes that large insurance losses suffered by RNRC in Q4 2023 affected its financial profile metrics, although they are still in the range of strong values, which allows the Agency to maintain the financial profile assessment at a high level.
The ratio of available capital to capital at risk calculated according to ACRA’s methodology stands at 2.6, which, combined with the assessments of other indicators, determines RNRC’s capital adequacy as high. When calculating capital adequacy, the Agency takes into account that the risk of significant growth of losses and disaster risk have limited impact, given the shareholder’s obligations to cover large insurance losses.
The high assessment of the quality of RNRC’s assets is due to the Company investing mainly in low-risk assets. Most of its assets include debt securities of the Russian Federation, as well as financial and non-financial companies with a high level of reliability. The capital-to-assets ratio (as calculated in line with the Bank of Russia’s requirements to financial sustainability and solvency of insurance companies) amounted to 0.25 as of the end of 2023.
The Company’s strong liquidity is determined taking into account the estimated short and long-term liquidity ratios of 1.44 and 1.34, respectively (actual indicators as of the end of 2023).
The Company’s management quality is assessed as high based on positive assessments of all the components of the factor.
Very high likelihood of extraordinary support from the state. In ACRA’s opinion, if necessary the Company will be provided with sufficient short-term and long-term funding, including capital injections, in view of the following:
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The Company performs the function of a national reinsurer, which has strong significance for the Russian economy;
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The state has significant influence on the Company’s strategy and operations.
The degree of dependence of the Company and the state on homogenous risk factors is assessed as medium.
Taking into account the above factors, the Company’s credit rating is set at AAA(RU).
key assumptions
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Retaining the key legislative provisions defining the Company’s status within the three-year horizon;
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The state promptly providing extraordinary support to the Company if necessary;
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Maintaining the current policies that govern risk management, investment, and underwriting (i.e. retaining the Company’s business model) within the three-year horizon.
POTENTIAL OUTLOOK OR RATING CHANGE FACTORS
The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.
A negative rating action may be prompted by:
- Downgrade of the Company’s financial profile assessment coupled with a lower level of state participation in the Company’s activities.
rating components
SCA: ааа.
Support: from the state, however, as the Company’s SCA has received the highest possible assessment, this support does not influence RNRC’s credit rating, which is set at AAA(RU).
issue ratings
There are no outstanding issues.
regulatory disclosure
The credit rating has been assigned under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings to Insurance Organizations on the National Scale for the Russian Federation, Methodology for Analyzing Rated Entities Associated with a State or a Group, and the Key Concepts Used by the Analytical Credit Rating Agency Within the Scope of Its Rating Activities.
The credit rating of JSC RNRC was published by ACRA for the first time on May 2, 2017. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.
The credit rating was assigned based on data provided by JSC RNRC, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the GAAP and IFRS financial statements of JSC RNRC. The credit rating is solicited and JSC RNRC participated in its assignment.
In assigning the credit rating, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided additional services to JSC RNRC. No conflicts of interest were discovered in the course of credit rating assignment.
