Passers-by at a UAP branch. file photo | nmg
UAP Insurance South Sudan rating for claims payment ability by
Global Credit Ratings (GCR) has been withdrawn following the
underwriter’s request.
GCR said it had not done any
updated analysis but only acted in accordance with the wishes of the
insurer, which means the agency will no longer provide ratings or
analytical coverage of UAP in the troubled country.
The move follows a downgrade last September when it was also accorded a negative outlook by the agency.
Despite
the withdrawal and earlier downgrading of the South Sudan subsidiary of
UAP Holdings, UAP Insurance Kenya and Uganda were given stable outlooks
last July.
“GCR has today [Thursday] withdrawn the national scale claims
paying ability rating assigned to UAP South Sudan. At the last review in
September 2017, GCR downgraded the insurer’s rating to BBB- from BBB+,
reflecting the deterioration in UAP South Sudan’s credit profile,” said
GCR in a statement.
It added the downgrading was based
on the insurer’s material aggregated exposure to a related party, which
was exacerbated by lower-than-anticipated performance on an underlying
earning asset.
The
downgrade related to the assessment that there was a higher risk of the
loans lent to the affiliate taking longer to be repaid even though they
were supposed to be only short- term.
The rating agency also noted the material exposure or loan did not rank highly among the loans that the borrower was to repay.
That
means that the risk is exacerbated by the fact that the loan is
subordinated to loans taken from entities external to the affiliate and,
therefore, its repayment to UAP South Sudan is not a priority.
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