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INSURANCE: GCR Affirms Coface South Africa Rating Of AA+(ZA) Outlook Stable


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Global Credit Ratings (GCR) has affirmed the national scale claims paying ability rating assigned to credit insurer Coface South Africa of AA+ with the outlook accorded as stable.

Global Credit Ratings said Coface has strong capitalisation with a statutory CAR cover at a multiple of 1,7 and an international solvency margin at 90% in F13. Inclusive of the limited guarantee from Cofinpar, a 100% owned subsidiary of Compagnie Francaise d’Assurance pour le commerce Exterieur (“Coface SA”), which GCR views as supplementing capital in adverse operating conditions.

“Coface South Africa employs a highly conservative investment strategy, which supports strong liquidity metrics. No changes to the pure cash strategy are expected for the next 12 to 24 months, supporting high liquidity forecasts over the rating horizon,” said the review.

GCR went on to say that Coface continued to register underwriting profitability over the past four years on both gross and net bases. This is reflective of the insurer’s core capabilities in portfolio management and underwriting disciplines, which GCR views to be indicative of sustained earnings capacity through the cycle.

“Coface ZA’s business profile reflects strong competitive positioning, with the insurer’s market share being maintained around 15%. This is partly offset by the high product risk emanating from the monoline focus on credit guarantee and the inherent cyclicality of the industry.”

“Reinsurance arrangements are placed internally with Coface SA. The high degree of reinsurance support underpins underwriting capacity, which is further fostered by the relationship with the group and franchise value. This also provides Coface ZA with business from key multinational clients, technical expertise and operational platforms.”

“A demonstrated and meaningful increase in both market penetration and exposure diversification in the long term, while maintaining profitability and credit protection measures at similar levels could lead to an upgrade. Furthermore, a strengthening in Coface ZA's strategic status within the Group may result in a positive rating movement,” the report said.

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