Market Overview

A.M. Best Assigns Credit Ratings to Russian Reinsurance Company JSC


A.M. Best has assigned a Financial Strength Rating of B (Fair)
and a Long-Term Issuer Credit Rating of "bb+" to Russian Reinsurance
Company JSC
(Russian Re) (Russia). The outlook assigned to these
Credit Ratings (ratings) is stable.

The ratings reflect Russian Re's balance sheet strength, which A.M. Best
categorises as strong, as well as its marginal operating performance,
limited business profile and appropriate enterprise risk management.

The company's balance sheet strength is underpinned by risk-adjusted
capitalisation at the strongest level, as measured by Best's Capital
Adequacy Ratio (BCAR), and good quality retrocession panel. Offsetting
these positive rating factors is the relatively low liquidity of Russian
Re's investment portfolio, with over a third of invested assets held in
real estate. Additionally, the company reported adverse reserve
development in the past, prior to implementing a revised reserving
approach from 2015, which incorporates a more appropriate classification
of risks.

Russian Re's operating performance is marginal, with the company
reporting a five-year weighted average combined ratio of 106.2% and
return on equity of 5.1% (2013-2017). Technical losses were reported in
the four years prior to 2016, due to a combination of factors, including
poor underwriting experience in the Middle East and North Africa region,
economic challenges in the domestic market and a relatively high expense
ratio due to the company's lack of scale. Positive underwriting results
were achieved in 2016, 2017 and the first half of 2018, with the
combined ratio maintained below 90%. The improvement was achieved
through corrective measures taken by the management, including exiting
unprofitable territories and tightening underwriting controls. Given the
historical volatility, uncertainty exists as to whether the improvements
in Russian Re's performance will be sustained over a longer term. The
company's investment results also have been subject to fluctuations,
particularly due to foreign exchange movements, but have been positive
in most years.

A.M. Best's assessment of Russian Re's business profile as limited stems
from its relatively small size, with gross written premiums (GWP) of
approximately USD 15 million in 2017, and limited geographical
diversification, with approximately 75% of GWP sourced from Russia. The
company maintains a 3% share in the local reinsurance market, and has
yet to demonstrate a successful strategy of consistent and profitable
international expansion. The company's medium-term plans include further
growth in Asia Pacific (where South Korea accounts for over half of
Russian Re's premium volumes) and entering the Latin American market.

This press release relates to Credit Ratings that have been published
on A.M. Best's website. For all rating information relating to the
release and pertinent disclosures, including details of the office
responsible for issuing each of the individual ratings referenced in
this release, please see A.M. Best's
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Best's Credit Ratings
. For information on the proper media
use of Best's Credit Ratings and A.M. Best press releases, please view
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