A.M. Best Affirms Credit Ratings of Polskie Towarzystwo Reasekuracji S.A.
Martina Seydoux, +44 20 7397 0308
Salman Siddiqui, +44 20 7397 0331
Christopher Sharkey, +1 908-439-2200, ext. 5159
Manager, Public Relations
Jim Peavy, +1 908-439-2200, ext. 5644
Director, Public Relations
A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Polskie Towarzystwo Reasekuracji S.A. (Polish Re) (Poland). The outlook of these Credit Ratings (rating) is stable.
The ratings of Polish Re reflect the explicit support provided by its ultimate parent, Fairfax Financial Holdings Limited (Fairfax), in the form of a legal binding guarantee with an indefinite term. The rating affirmations also consider Polish Re’s volatile risk-adjusted capitalisation, historically weak underwriting performance and uncertain business profile.
In addition to the explicit parental guarantee, Fairfax continues to provide technical and capital support, as well as other forms of assistance to Polish Re, which includes technical reserving support and investment management services. In 2015, Polish Re participated in Fairfax’s acquisition of QBE Insurance Group Limited’s (QBE) branch operations in the Czech Republic, Hungary and Slovakia. As part of the transaction, Polish Re provided a 100% quota share protection for new and renewal business underwritten by the former QBE branch operations. In the first half of 2016, Fairfax migrated this business to its newly established direct insurance company based in Luxembourg, which now underwrites new policies written out of the former QBE branches. At the same time, the quota share arrangement between Polish Re and the former QBE insurance operation expired.
In 2016, Polish Re’s gross written premiums decreased by 39% to PLN 263 million, driven largely by the discontinuation of the quota share arrangement with the former QBE branches acquired by Fairfax. Polish Re’s risk-adjusted capitalisation remained stable in 2016. However, A.M. Best believes the sufficiency of Polish Re’s risk-adjusted capitalisation over the medium term will likely depend upon a sustained improvement in technical performance and a smooth run-off of its Polish motor third party liability (MTPL) reserves.
Polish Re produced an underwriting loss of PLN 4.7 million in 2016 (2015: profit of PLN 3.7 million), driven largely by reserve strengthening in the Polish MTPL run-off portfolio and adverse currency movements. These were softened by favorable reserve development in other lines of business. Although A.M. Best expects Polish Re’s withdrawal from the unprofitable MTPL segment to support a lower level of claims activity in the longer term, adverse run-off experience could still arise from legislative changes in Poland’s motor liability regime. In addition, technical results are likely to remain affected by the impact of the global softening in reinsurance conditions on pricing.
Polish Re continues to face material challenges in improving its competitive position, owing to its limited business profile in the highly competitive international reinsurance market. Although management’s decision to withdraw capacity from the unprofitable MTPL segment is expected to benefit Polish Re’s future performance, it has also altered materially the company’s business profile, increasing its susceptibility to a volatile operating environment.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper [..].
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