A.M. Best Affirms Rating of Accident Compensation Corp.

March 18, 2003

A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) of Accident Compensation Corporation (ACC), New Zealand. The outlook is stable.

The rating reflects ACC’s unique status, which gives it the New Zealand government’s support of its unfunded liabilities, and its commitment to reach fully funded status. Offsetting these factors is a minimal risk of a change in legislation.

ACC’s unique status as a Crown Entity provides its unfunded liabilities the support of the New Zealand government. Due to its change on July 1, 1999, from a pay-as-you-go basis to a fully funded basis, ACC currently has a NZD 3.6 billion (USD 1.9 billion) reserve shortfall in its long-tail actuarial liabilities. While the company is currently under-reserved, A.M. Best recognizes ACC’s on-target progress towards its commitment to become fully funded by June 30, 2014, through premium pricing and tail levies.

The rating is predicated upon the New Zealand government’s legislated support of ACC; however, A.M. Best believes that the risk of a change in legislation is minimal.

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