2013-08-21 16:07:04 -
A.M. Best Asia-Pacific Limited has affirmed the financial strength rating of B+ (Good) and issuer credit rating of “bbb-” of China Taiping Insurance (NZ) Co., Limited (CTPNZ) (New Zealand). The outlook for both ratings is stable.
The rating affirmations recognize CTPNZ’s adequate reinsurance buffer and its progress in settling claims thus far for the 2010-11 earthquakes, as well as the actions taken to de-risk its business and control operating expenses. The ratings also acknowledge the financial flexibility CTPNZ receives from its affiliation with China Taiping Insurance Group (HK) Company Limited.
CTPNZ's valuations of the 2010-11 earthquakes indicate that losses remain within the reinsurance limits in place for the respective events.
The company ceased writing new business from August 1, 2012, continued to
settle outstanding claims arising from the 2010-11 earthquakes and initiated a number of expense control measures. These actions have improved the company’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). In assessing CTPNZ’s prospective balance sheet strength, A.M. Best notes the company will further tighten operating expenses in 2013 and 2014 and settle all outstanding claims by December 31, 2014.
Partially offsetting these positive rating factors are CTPNZ's declining capital trend and regulatory solvency margin, high dependence on reinsurance and claims escalation that may potentially delay the settlement process.
CTPNZ’s capital is expected to decline steadily and be marginally above the regulatory minimum level by December 31, 2014, as run-off expenses exceed investment income. Reinsurance recoverables associated with the 2010-2011 earthquakes have been reduced but remain at a high level relative to capital. This could expose the company to potential reinsurance disputes and liquidity risk during the run-off phase.
An upgrade of CTPNZ’s ratings is unlikely in the near term. Negative rating actions may occur if the company’s run-off period is longer than anticipated, i.e. beyond 2014, and/or if its capital position falls short of A.M. Best’s expectations.
The methodology used in determining these interactive ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
A.M. Best Asia-Pacific Limited is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
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