AM Best keeps Ethiopian Re rating stable as capital strength offsets country risks

Ethiopia’s largest reinsurer is benefiting from stronger underwriting and high domestic interest rates, although political and financial-system risks remain a drag on its credit profile

AM Best has affirmed Ethiopian Reinsurance S.C.’s financial strength rating at B (Fair) and its long-term issuer credit rating at bb (Fair), maintaining a stable outlook as the Ethiopian reinsurer balances improving profitability against the country’s elevated economic and political risks.

The ratings agency said Ethiopian Re’s balance sheet remained a key strength, with risk-adjusted capitalisation expected to stay at its “strongest” level under AM Best’s capital adequacy assessment. The company is also expected to retain sizeable capital buffers as it pursues its growth strategy, supported by internally generated capital and injections from shareholders.

The assessment nevertheless reflects the risks associated with operating predominantly in Ethiopia, where AM Best identifies economic risk as high and political and financial-system risks as very high.

Those risks are partly cushioned by what AM Best describes as a conservative investment portfolio, with the bulk of assets held in cash and deposits.

Profitability improves

Ethiopian Re’s financial performance has strengthened in recent years. At the end of its financial year in June 2025, the company reported a 19 per cent return on equity, according to AM Best.

The agency cautioned that the figure needs to be viewed against Ethiopia’s unusually high interest-rate environment. The National Bank Rate reached 16 per cent in July 2026, increasing the contribution that investment income can make to insurers and reinsurers holding deposits and other interest-bearing assets.

Underwriting performance has also improved. Ethiopian Re’s net/net combined ratio — a key measure of underwriting profitability, with a ratio below 100 per cent indicating an underwriting profit — fell to 92 per cent in 2025, from a peak of 108 per cent in 2023.

AM Best said non-life underwriting had been “robust” more recently, although it remained subject to volatility.

Looking ahead, the agency expects investment income to remain the principal driver of earnings, reflecting Ethiopian Re’s relatively low net underwriting leverage and the attractive interest rates available from domestic banks.

Small by global standards

Despite its position in Ethiopia, Ethiopian Re remains a relatively small player internationally. It generated about $22mn in insurance service revenue in the year to June 2025.

Founded in 2016, the company writes composite reinsurance business in Ethiopia and selected African markets. More than 95 per cent of its revenue comes from Ethiopia, where its market position is strengthened by regulatory arrangements that give it access to mandatory cessions from local insurers as well as a first right of refusal on domestic business ceded to reinsurers.

That privileged access provides Ethiopian Re with a degree of protection in its home market, while also leaving the company highly concentrated geographically.

The rating therefore presents a familiar trade-off for investors and counterparties: strong capitalisation and improving operating results on one side, and Ethiopia’s challenging sovereign and financial environment on the other.

AM Best’s stable outlook indicates that, for now, the rating agency expects the reinsurer’s financial strength to remain broadly resilient despite those external pressures.