African Trade Insurance Agency given an ‘A’ Rating by Standard & Poor’s
Nairobi. 6 May, 2008
The African Trade Insurance Agency (ATI), Africa's only multilateral political and credit risk insurer, has been assigned by Standard & Poor's a long term A, Strong, rating for both its Counterparty and Insurer Financial Strength Ratings, with a 'Stable' outlook. Standard and Poor's (S & P) is a major international rating agency.
The S&P report can be found on www.standardandpoors.com/ratingsdirect.
A Counterparty credit rating is a current opinion of an obligor's capacity and willingness to meet its financial obligations as they come due.
An Insurer Financial Strength rating is a current opinion of the financial security characteristics of an insurance organization with respect to its ability to pay under its insurance policies and contracts in accordance with their terms.
Commenting on this critically important development for the Agency ATI's Chief Executive Officer Mr.Peter M. Jones said, "This is a significant milestone in our history that is certain to open up more business opportunities for us." He noted that for ATI to engage with regional and international commercial enterprises it had been very important for the Agency to attain an investment grade rating from a major international credit rating agency, and that ATI was pleased that S & P has had the foresight to support the rating process in Africa in general, and to assign an "A" Rating/Stable to ATI.
With increased opportunities to support trade and investment in its African Member States as a direct result of this event, Mr. Jones stated that this would result in increased international trade and investment for Africa. ATI shareholders would get an improved return on their investment, while its African Member States would register increased international trade. He also hoped that it would encourage more African States to join the Agency in order that their business community could also benefit from the products and services offered by ATI.
Mr Jones added that ATI's core strategy was to promote trade and investment in Africa through the provision of political and credit risk insurance, particularly short-term export credit insurance for new and existing African exporters. Coming on top of the Agency's legal and capital restructuring, which has resulted in the Agency's paid in capital and committed contingent capital reaching almost US$140 million, this new rating would serve to confirm to existing and potential customers and commercial banks that the Agency was well capitalized with a strong ability and willingness to pay claims. "Servicing regional economic growth and development will through facilitating international trade and investment is ATI's primary goal" he said.
Since 2006, when Mr. Jones was appointed the Agency's new Chief Executive, the Agency has made significant progress in addressing the needs of a changing and dynamic marketplace in Africa. For example, in 2007 alone the Agency:
|Generated gross written premium in excess of US$1 million and expects this figure to exceed US$4 million in 2008;|
|Gross exposure has increased from US$20 million at the end of 2006 to over US$80 million as at the end of March, 2008;|
|Provided investment insurance for transactions valued at over US$271 million and whole turnover credit insurance supporting exports worth over US$65 million;|
|Paid its first claims amounting to US$ 64,859 clearly demonstrating the value of an ATI policy;|
|Opened its first underwriting field office in Kampala, Uganda, thus expanding its physical presence outside Kenya for the first time and expects to open two further field offices this year, in Tanzania and Zambia; and|
|Welcomed the Republic of Sudan as its twelfth African Member State.|
The S&P report had delivered a 'strong' verdict on ATI's capitalization, investments and liquidity. "ATI is very strongly capitalized following the norms of peer group supranationals. Current capital adequacy is extremely strong, with total capital as at Dec. 31, 2007 equivalent to over 90% of gross underwriting exposure. Although capitalization will weaken as business volume grows, we expect capital utilization controls to ensure capitalization remains very strong (greater than 43% of net exposure). " the report said.
The analysts noted ATI's strong investment strategy, as ATI places invested funds in strongly rated banking institutions, with funds held overwhelmingly in U.S. dollars. In addition, by reference to its gross and net underwriting exposure, ATI has strong liquidity, with available current funds in excess of gross exposure. As business volume increases, they expect this to weaken, but to remain a strength for the rating.
The analysts also noted that although the potential for adverse economic conditions in Africa were significant, these were partially offset by ATI's preferred creditor status with its member countries, and by the implicit backing of the World Bank's International Development Association for the member states and ATI's operational agenda.