2013-10-09 18:02:03 -
A.M. Best Asia-Pacific Limited has downgraded the financial strength rating to B+ (Good) from B++ (Good) and issuer credit rating to “bbb-” from “bbb+”of New Zealand Local Government Insurance Corporation Limited (Civic Assurance) (New Zealand). Both ratings have been removed from under review with negative implications and assigned a negative outlook.
The ratings mainly reflect A.M. Best’s concerns over Civic Assurance’s reinsurance recoverable risk, which is sizable relative to the company’s capitalization. The ratings also reflect a much slower-than-anticipated reduction in Civic Assurance’s reinsurance recoverable risk over the past nine months.
Currently, Civic Assurance is in reinsurance arbitrations with two of its reinsurers in relation to losses incurred from the Canterbury earthquakes. While management is confident that these amounts are ultimately recoverable,
A.M. Best also considers the possibility that the process could linger for an unknown period of time. Prolonged delays in reinsurance recovery have resulted in uncertainties with respect to the company’s licensing status and future operating plan.
Partially offsetting these negative rating factors is Civic Assurance’s risk-adjusted capitalization, which as evaluated by Best’s Capital Adequacy Ratio (BCAR), remains supportive of its ratings. The negative outlook on the ratings mainly reflects the uncertainties regarding the outcomes of Civic Assurance’s reinsurance arbitrations, as well as its consecutive losses.
Factors that could result in negative rating actions include negative regulatory action, unfavorable arbitration outcomes, further reinsurance disputes or a significant deterioration in Civic Assurance’s risk-adjusted capitalization.
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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