AIO Credit Assessment Scheme
In co-operation with S&P London and UNCTAD

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Introduction

The African Insurance Organisation (AIO) has developed with the technical assistance of Standard & Poor’s (S&P) and UNCTAD an assessment scale of security strength that will facilitate the achievement of the following goals:

• the development of intra-African reinsurance and exchange of risks
• the strengthening of insurers credit characteristics
• the adoption of increasing financial awareness and skills by insurers, reinsurers and supervisory authorities.

S&P currently prepares a number of ratings of insurers operating in Africa using both interactive and public information methodologies. S&P has experience in Europe of developing credit assessment in a variety of markets. The AIO scheme is developed to cover African Non-Life insurers that are not currently covered by S&P and is based predominantly on the PI analytical approach.

Overall scheme description

The AIO credit assessment scheme is based primarily on the statistical analysis of insurers financial accounts augmented by evaluation of insurers’ management competencies and the regulatory and economic characteristics of the markets within which the companies operate. The definitive credit assessments is taken by the “Security Committee” of the AIO supported by S&P in a technical but not executive sense.

Distribution and uses of AIO credit assessments

The AIO scheme is developed for those members who wish to be assessed but are not covered by S&P’s interactive or PI rating services. It is envisaged that insurers will have either an AIO or an S&P credit assessment but not both at the same time.

The AIO scheme is a voluntary process that its members decide to participate in at will. Consideration is being given to making an AIO assessment a condition of participation in the underwriting pools set up by the AIO.

The AIO Security Committee

The composition and reputation of the AIO Security Committee is of fundamental importance to the credibility and success of the scheme. The Security Committee is formally constituted as a sub-committee of the AIO Executive Committee and is chaired by the President of AIO. Operational control is provided by the AIO Secretary General who is a full member of the Committee. Members of the committee comprise competent professionals from the African Insurance industry and regulators. S & P and UNCTAD are members in a consultative capacity.

All policies covering the composition and proceedings of the Security Committee are published to the AIO membership. This level of transparency will establish and enhance the independent reputation of the committee. The Committee also submits regular reports covering its proceedings, observations about major credit trends, and the broader aspects of its work.

Assessment Methodology

S&P uses a scoring algorithm to determine credit strength. The same model is used for all insurers. The score outcome and equivalent rating is considered by a rating committee before the rating is published.