AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Bosna Reosiguranje d.d. Sarajevo (Bosna Re) (Bosnia and Herzegovina [BH]). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Bosna Re’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

Bosna Re’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which is expected to remain at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by good internal capital generation and a modest increase in underwriting risks. The company’s investment portfolio, which is concentrated in domestic assets, remains the greatest source of capital consumption in BCAR. This concentration heightens Bosna Re’s exposure to the elevated levels of economic, political and financial system risks in BH. Offsetting rating factors also includes Bosna Re’s relatively small capital base, which provides only a limited capital buffer in absolute terms to protect against adverse events. Dependence on retrocession remains high; however, the associated elevated credit risk is mitigated partly by a stable retrocession panel of excellent credit quality.

Bosna Re’s overall profitability has been stable during the past five years (2019-2023), with a weighted average return on equity of approximately 8%, supported by profitable underwriting and investment activities. Underwriting performance remained good in 2023, as evidenced by a combined ratio of 94.6%, which was in line with the company’s five-year (2019-2023) weighted average of 94.5%. Investment results have supplemented earnings consistently but have been modest; the company’s five-year (2019-2023) weighted average investment yield (including gains) was 2.5%. AM Best expects earnings to remain positive as Bosna Re grows its top line whilst maintaining its cautious underwriting strategy, which focuses on careful risk selection and a comprehensive use of retrocession protection.

With high barriers to entry in BH, Bosna Re benefits from a dominant market position as the only domestic reinsurer licensed to write life and non-life reinsurance. The company remains the leading domestic reinsurer with a market share in the region of 75%, based on 2023 gross written premium (GWP). Offsetting factors in the business profile assessment include Bosna Re’s highly concentrated underwriting portfolio, with half of GWP derived from its top three cedants and its limited geographic diversification (with international business limited to 9%).

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