Best Upgrades Ratings of Taiping Reinsurance

A.M. Best has upgraded the financial strength rating to A (Excellent) from A- (Excellent) and the issuer credit rating to “a” from “a-” of Taiping Reinsurance Company Limited (TPRe) (Hong Kong). The outlook for both ratings is stable.

The ratings reflect TPRe’s improvement in capitalization and underwriting performance. The ratings also acknowledge the support TPRe receives from its parent, China Taiping Insurance Holdings Company Limited (CTIH), in terms of capital contribution and operational support. CTIH’s major shareholder is China Taiping Insurance Group Ltd. (TPG), which is 100% owned by the Ministry of Finance of the People’s Republic of China.

TPRe is the only pure reinsurer under TPG, and it is fully integrated into the group’s operations and management. In 2012 and 2013, TPRe received capital injections of HKD 250 million and HKD 500 million from CTIH. CTIH is committed to continuously supporting TPRe going forward.

TPRe’s capitalization has improved over the past two years, as a result of the company’s retained earnings and capital injection from CTIH. TPRe’s risk-adjusted capitalization has also improved and is supportive of its current ratings.

TPRe returned to underwriting profitability in 2013. As of fiscal year-end 2013, there has been no further adverse loss-reserve development from the major catastrophe losses incurred prior to 2012. In addition, there was no major natural catastrophe event impacting TPRe’s underwriting result significantly during 2013.

Offsetting these positive rating factors is the competitive reinsurance market in the Asia-Pacific region. Competition from existing reinsurers and new entrants continues to squeeze the underwriting profit margins of reinsurance business from Asian markets. Any future major catastrophe events can potentially impact TPRe’s underwriting results and capitalization. To support its business development in different markets and lines of business, TPRe needs to continuously strengthen its catastrophe risk management and enterprise risk management capabilities.

Positive rating actions are unlikely in the near term. Negative rating actions could occur if the company’s risk-adjusted capitalization declines to a level below A.M. Best’s expectations due to a material deterioration in operating performance or aggressive business growth.

Source: A.M. Best Asia-Pacific Limited