2014-02-21 20:36:02 -
A.M. Best has downgraded the financial strength rating (FSR) to C++ (Marginal) from B (Fair) and issuer credit rating (ICR) to “b+” from “bb” of Lemma Insurance Company (Lemma) (Ukraine). A.M. Best has also placed the ratings under review with negative implications.
The downgrading of Lemma’s ratings reflects the high risk environment in which it operates, due to the rapid decline of the Ukrainian economy.
A.M. Best considers these conditions to have diminished the company’s ability to meet its policyholders’ obligations.
Due to the ongoing political instability and social unrest in Ukraine, A.M. Best is concerned with Lemma’s ability to maintain risk-adjusted capitalisation at an appropriate level, owing to the company’s high underwriting and financial risk exposures to the domestic market. These
risks are further exacerbated by Lemma’s reinsurance strategy, which places a large portion of its business with a local unrated reinsurer.
Business derived from Ukraine accounts for approximately a third of Lemma’s gross premium volumes, whilst the company’s investment portfolio remains solely concentrated in the domestic market. In view of the high currency risk associated with the potential for further devaluation of the Ukrainian Hryvnia, significant uncertainty exists with Lemma’s ability to fulfill both its domestic and foreign policyholders’ obligations.
The under review with negative implications status will remain until A.M. Best can adequately assess Lemma’s risk-adjusted capital position and prospective capital management strategy. A.M. Best’s evaluation will be based on audited financial accounts for the 2013 year (based on international financial reporting standards) and will consider the outcome of an investment stress test to support any rating actions taken. A.M. Best expects to resolve the under review status no later than mid-year 2014.
There are no upward rating pressures. Negative rating actions could occur if Lemma’s risk-adjusted capitalisation deteriorated to a level unsupportive of the company’s high risk profile. Additionally, further deterioration in the political situation in Ukraine would likely result in negative actions being taken.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M.
Best Europe - Rating Services Limited Supplementary Disclosure : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
This rating announcement has been issued by A.M. Best Europe – Rating Services Limited, which is a subsidiary of A.M. Best Company.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
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