AM Best Comments on Credit Ratings of Kommesk-Omir Insurance Company JSC Following Reduction of Regulatory Solvency Margin

AM Best has commented that the Credit Ratings (ratings) of Kommesk-Omir Insurance Company JSC (Kommesk) (Kazakhstan) remain unchanged following a reduction in the insurer’s regulatory solvency margin. The company’s solvency margin was 0.72 at 1 June 2022 (on a stand-alone basis, excluding the company’s life subsidiary, Centras Kommesk Life JSC), compared with a regulatory minimum of 1.

The decrease in the metric is driven primarily by valuation losses on Kommesk’s investments. Fixed-income holdings have been subject to value reduction, predominantly caused by the increase of the base interest rate in Kazakhstan in April 2022, and the lower credit quality of bonds from Russian issuers, whereas the valuation of the company’s equity investments has been affected adversely by the negative performance of the stock market in the country. In addition, Kommesk excluded some of its investments from its admissible assets, as required by the regulator, to reflect an affiliation between the insurer and the counterparty, which caused a further reduction of the margin.

The ratings are unchanged as, in spite of the decline in the valuation of Kommesk’s investments, its balance sheet strength fundamentals remain supportive of a strong assessment. In particular, the company’s consolidated risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), remains at the strongest level.

The impact of the solvency margin reduction on the company’s operations is likely to be limited as, to date, it has not created any regulatory or operational consequences for the company. The National Bank of Kazakhstan has announced a temporary suspension of the minimum solvency requirements in cases where reduction in the metric has been caused by a rapid decrease in the valuation of investments or lower credit quality of assets. AM Best understands that Kommesk has submitted a recovery plan to the regulator and aims to increase its margin back to at least 1 by September 2022. AM Best will closely monitor how the recovery plan is implemented. Should the company’s investment portfolio experience further adverse valuation movements or if there is any impact on operations due to regulatory solvency concerns, a rating action is possible.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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