Wholly state-owned Export Credit Guarantee Corporation of India (ECGC) recorded strong technical earnings in the fiscal years 2023 and 2024, notes AM Best.
ECGC has also benefited from favourable prior-period claims reserve development, driven by better-than-expected claims experience and its conservative reserving methodology, notwithstanding the volatility in preceding years stemming from heightened geopolitical risks and economic uncertainty. In addition, favourable investment income continues to support overall profitability.
Outlooks revised to ‘Positive’
AM Best has revised the outlooks to ‘Positive’ from ‘Stable’ and affirmed ECGC’s Financial Strength Rating (FSR) of ‘B++ ‘(Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of ‘bbb+’ (Good). Concurrently, AM Best has affirmed the company’s India National Scale Rating (NSR) of ‘aaa.IN’ (Exceptional) with a ‘Stable’ outlook.
The ratings reflect ECGC’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile, and appropriate enterprise risk management. In addition, the ratings factor in a neutral impact from the company’s ownership by the government of India.
The revision of the FSR and Long-Term ICR outlooks to ‘Positive’ from ‘Stable’ reflects an improvement in AM Best’s view of ECGC’s operating performance assessment supported by an improving trend in the company's underwriting performance, particularly within its export credit insurance to banks segment.
Balance sheet strength
ECGC’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which is expected to remain at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). ECGC benefits from good financial flexibility, supported by capital contributions from India’s government. In addition, the company has a low to moderate risk investment portfolio. An offsetting balance sheet strength factor includes the company’s net exposure to severe stress scenarios, although the risk is mitigated in part by the company’s robust capitalisation level.
Business profile
ECGC’s business profile is assessed as neutral. The company is a monoline credit insurer providing export credit insurance to banks and Indian exporters. As a market leader in the export credit insurance market in India, ECGC insures approximately 40% of the total export credit disbursement by banks. However, the company’s book of business exhibits limited product line diversification and a high concentration of risk exposure to a small group of exporters. Furthermore, its underwriting portfolio is exposed to moderate to high reserving risk given the long-tail nature of credit insurance claims.