Best Assigns Ratings to Starr Property & Casualty Insurance (China)

July 17, 2014

A.M. Best has assigned the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” to Starr Property & Casualty Insurance (China) Company, Limited (Starr China), formerly known as Dazhong Insurance Company Limited. The name change is pending completion of the local process. The outlook assigned to both ratings is stable.

The ratings “reflect Starr China’s adequate level of risk-adjusted capitalization and a prudently managed investment portfolio,” Best explained. “The ratings also benefit from the business and operational support of Starr International Company, Inc. (SICO) and its insurance subsidiaries, and the capital commitment from Starr Insurance & Reinsurance Limited (SIRL), one of the affiliated companies within SICO, which is a 20 percent shareholder of Starr China.”

Best’s report also indicated that “since SIRL took over management control in 2011, Starr China has actively reduced its equity exposure and restructured its investment portfolio with a stronger emphasis on deposits and quality fixed income investments. In 2014, Starr Indemnity & Liability Company, another affiliated company within SICO, has been progressively acquiring shares in Starr China, which when completed will increase SICO’s aggregate holdings through its subsidiary companies to 92.42 percent from 20.0 percent in 2011.

“A new management team was appointed to Starr China in 2014 to revamp its commercial product mix and distribution strategy with the support of SICO and its insurance company subsidiaries. The new management will centralize the decision-making function at Starr China’s headquarters to streamline the company’s managerial and operational structures.

“Additionally, claims services and distribution network will be restructured to improve cost efficiency. These measures are expected to deepen the degree of managerial integration with SICO and its insurance company subsidiaries in the long run. SIRL has also provided various reinsurance supports, including a stop-loss arrangement, to help stabilize the company’s profitability metrics going forward.”

As partial offsetting factors Best cited “Starr China’s historical volatile and unfavorable underwriting performance, and the challenges the company faces in executing its business plan. The acceptance of the company’s new commercial lines products and the effectiveness of the new distribution model remain to be tested in China’s increasingly competitive non-life market.

In conclusion Best said: “Positive rating movement could occur if Starr China can demonstrate a sustainable improvement in underwriting performance and the quality of business, coupled with an enhanced market position and capitalization.

“Negative rating movement could result from a material adverse deviation from the company’s business plan, a significant decline in the risk-adjusted capitalization or a reduced level of support provided by SIRL or SICO.

Source: A.M. Best

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