In an Issuer Comment published on 1 October, Moody’s Investors Service rated Ghana’s membership as credit positive to ATI based on several factors:
NAIROBI, 11 October, 2019 – In a recently released Issuer Comment, Moody’s Investor Service rated Ghana’s membership as ‘credit positive’ for the African Trade Insurance Agency (“ATI”). The membership was facilitated by the German development bank Kreditanstalt fuer Wiederaufbau (“KfW”) with €16 million ($17.5 million) financing to cover Ghana’s membership, and highlights the German government’s continued support of ATI’s mandate.
Moody’s assessment was based on three factors: The addition of Ghana’s membership is expected to further increase diversification of ATI’s membership and guaranteed portfolio; ATI will benefit from its dejure Preferred Creditor Status (“PCS”) on guarantees it provides to government related counterparties in Ghana; and lastly, Moody’s notes that Ghana’s membership strengthens ATI’s market position and reputation helping it attract more reinsurance support to the region.
The Moody’s Comment emphasized the importance of private reinsurers to ATI’s business, which allows it to transfer a significant amount of the risk it underwrites to reinsurers allowing ATI to “supplement its own balance sheet. At 30 June 2019, ATI had gross guarantee exposures outstanding of approximately $5.9 billion, or 24x its shareholder’s equity ($286.8 million at 30 June 2019), primarily composed of members’ capital and retained earnings) with exposure net of reinsurance at around 3.8x its member capital.”
Moody’s also stated “ATI’s strong relationships with reinsurers has enabled it to increase its gross leverage considerably over the past two years, while still maintaining conservative net exposure leverage.” Based on a similar level of leverage in the future, Moody’s estimates that Ghana’s contribution will enable ATI “to increase its gross exposures by approximately $400 million to $6.3 billion” with a further potential to grow its gross exposure even more depending on the structure of reinsurance protection on new transactions.”
The full report can be accessed here: