Standard & Poor’s Ratings Services has lowered its local currency long-term counterparty credit and insurer financial strength ratings on Morocco-based Société Centrale de Réassurance (SCR) to ‘BBB’ from ‘BBB+’. The outlook is stable.
The downgrade follows the similar rating action we took on the Kingdom of Morocco (see “Morocco’s ‘BBB-‘ FC Rating Affirmed; Local Currency Rating Lowered To ‘BBB’ On Revised Methodology; Outlook Stable,” published July 13, 2011), linked to a change in our methodology for rating sovereign governments.
We consider SCR to be a government-related entity (GRE). In accordance with our criteria for GREs, the rating on SCR reflects our opinion that the likelihood of timely and sufficient extraordinary government support to SCR is almost certain in the event of financial distress. Therefore, we equalize the local currency long-term rating on SCR with that on the sovereign. We base our approach on our view of SCR’s integral link with and critical role for the government.
Our assessment of SCR’s stand-alone credit profile remains unchanged at ‘bbb’.
The stable outlook on SCR reflects that on Morocco. In application of our GRE rating methodology, any upward or downward movement in the local currency long-term sovereign rating on Morocco would trigger a similar change in the rating on SCR.
We believe that, notwithstanding the gradual end of legal cessions, SCR will continue to play a critical role for the government, which has specifically mandated it to provide protection for some catastrophe risks. Equally, we consider that SCR’s integral link with the Moroccan government, underpinned by the full guarantee on SCR’s balance sheet, will remain unaltered over the next two years.
Source : Standard & Poor’s
