AM Best revises French cat reinsurer outlook to negative

AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (ICR) and affirmed the Financial Strength Rating (FSR) of A+ (Superior) of Caisse Centrale de Réassurance (CCR) (France), the state-backed catastrophe reinsurer. The outlook of the FSR is stable. At the same time, the agency has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” (Excellent) of CCR’s commercial subsidiary, CCR RE (France). The outlook of these ratings is stable. The parent group, a public-sector reinsurer that provides cedants operating in France with coverage against natural catastrophes and uninsurable risks, has seen its outlook revised to negative because of increased concerns about the French state’s creditworthiness. “The revision of CCR’s Long-Term ICR outlook reflects deterioration in the creditworthiness of the Republic of France, from which CCR receives rating lift. The deterioration in the company’s creditworthiness is tied to increasing government debt levels along with a wider economic slowdown,” said AM Best. This follows the move by Standard & Poor’s to cut France's outlook to negative from stable, as it sees rising risks to the country's public finances and the resulting fiscal space reduction. The downgrade comes as a result of France's already large general government debt, an implementation risk associated with its structural reform agenda, a wider economic slowdown and the European Central Bank's monetary tightening, S&P said. S&P said the country's slowing economy and government measures to cushion households and businesses from energy inflation are expected to weigh on public finances. S&P believes the rise in energy prices since the Russia-Ukraine war may prove to be a much longer-lasting shock to European economies than the temporary fall in demand triggered by the arrival of Covid-19 in 2020. Moody’s meanwhile took a different view and affirmed the government of France's local- and foreign-currency long-term issuer and local-currency senior unsecured ratings at Aa2. The outlook remains stable. Moody’s said its decision was based on two core factors: France's wealthy and diversified economy, which has a more benign demographic profile than those of many other advanced economies Strong debt affordability in spite of an elevated debt level. “The stable outlook reflects Moody's view that risks to France's credit profile are balanced at this stage. France continues to reap the benefits of structural economic reforms, particularly to the labour market, which have been implemented in recent years. The government aims to implement further reforms to the pension system that could address still-low labour-force participation rates for older workers,” said Moody’s. “On the other hand, there is little prospect of material debt reduction during the term of this government and there are risks that debt affordability will weaken more quickly than in other highly rated euro-area countries such as the government of Germany (Aaa stable), the government of Austria (Aa1 stable) and the government of Finland (Aa1 stable),” it added.

AM Best revises French cat reinsurer outlook to negative

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Want to read this article?

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