A.M. Best has downgraded the financial strength rating to B++ (Good) from A- (Excellent) and the issuer credit rating to “bbb” from “a-” of Hyundai Insurance (China) Co. Ltd., or HIC. Following these actions, the ratings remain under review with negative implications.
The rating actions reflect material deterioration in HIC’s risk-adjusted capitalization following the recent large scale losses caused by the Tianjin Port explosions on Aug. 12, 2015 and the full write-off of the significant reinsurance recoverable related to the loss from the Hynix factory fire in 2013.
Although Hyundai Insurance (China) Co. maintains low underwriting leverage and a conservative investment portfolio, the large scale losses in recent years led to the substantial decrease in capital and surplus and widening operating losses, A.M. Best said in a statement.
In addition, the ratings also consider the wide range of support HIC receives from its parent company, Hyundai Marine & Fire Insurance Co. Ltd. (South Korea), which is currently working on a recapitalization plan for HIC, A.M. Best added.
A.M. Best said it expects to continue regular discussions with HIC’s management to review its efforts to improve its capitalization, after which the “under review status” is expected to be resolved.
Positive rating action could occur if there is a material increase in risk-adjusted capitalization through the successful recapitalization by the parent company. Negative rating action could occur if there is a continued deterioration in risk-adjusted capitalization or a sustained deterioration in operating performance.
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 affirmed.
Source: A.M. Best
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