Best Affirms Ratings of General Insurance Corporation of India

February 9, 2015

A.M. Best has affirmed the financial strength rating of ‘A-‘ (Excellent) and the issuer credit rating of “a-” of India’s General Insurance Corporation of India (GIC Re), both with stable outlooks.

Best said the “ratings reflect GIC Re’s solid risk-adjusted capitalization, consistently favorable investment results and its strong presence in the Indian and overseas reinsurance markets.

“GIC Re’s capital and surplus increased by approximately 20 percent for fiscal year 2013-2014. The growth was supported by the company’s consistent and favorable investment results. GIC Re’s risk-adjusted capitalization level remains strong and is supportive of its current rating level.”

In addition Best pointed out that “GIC Re had a strong presence in India’s insurance market as the sole national reinsurer, and continues to expand its business overseas, including Asia, Europe and Africa. Approximately half of the premium is generated abroad for fiscal year 2013-2014.”

As offsetting factors Best cited “GIC Re’s high exposure to equity market volatility, increasing catastrophe exposures and unsatisfactory underwriting performance.”

The report explained that “equity investment risk remains one of the key components in GIC Re’s risk-based capital requirement. Equity investments were approximately 80 percent of its reported surplus. The adverse movement in India equity market can have material impact on GIC Re’s Best’s Capital Adequacy Ratio (BCAR) score.

“GIC Re’s catastrophe exposure has increased in recent years as a result of the growth in its domestic and overseas business. In the past five years, catastrophe losses had added volatility to the underwriting performance of the company.”

In conclusion Best said: “Future upward rating actions could occur if GIC Re demonstrates the ability to achieve consistently favorable underwriting performance and strengthen its investment and catastrophe risk management capability.

“Conversely, downward rating actions could occur if the company’s risk-adjusted capitalization declines materially as a result of unsatisfactory operating performance or a decline in its fair value change account.”

Source: A.M. Best

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