A.M. Best Co. announced that it has affirmed the financial strength rating (FSR) of “A-” (Excellent) of Korean Reinsurance Company, and has assigned an issuer credit rating (ICR) of “a-“. The outlook on both ratings is stable.
“The ratings reflect Korean Re’s excellent operating performance with limited volatility, improvement in absolute capitalization and strong market position in the Korean reinsurance industry,” said Best. They also “recognize the company’s ability to quickly provide products to meet market demand.”
Best explained: “For the past five years, the combined ratio of the company has been between 94 percent and 98 percent. Investment income has moved in line with interest rates as the company’s investment portfolio is dominantly fixed income driven. As Korean Re’s domestic insurance portfolio is mainly proportional business and as the company does business with most companies in the market, risk is fairly well diversified with no major peak risk.
“Under the Korean local solvency standard, the company is adequately capitalized with a local solvency ratio of 193 percent. Providing further comfort is the extensive retrocession program, which offers a substantial cushion for the company’s capital base.”
Best said it “believes that over 60 percent of the domestic non-life reinsurance market is reinsured by Korean Re. In recent years, the company has expanded its reinsurance operations into life reinsurance and overseas reinsurance, with a focus on Asian business. This will bring further diversification into the company’s portfolio.
“Offsetting these positive attributes is the company’s high underwriting leverage of 2.7 times as of fiscal year 2004, moderate credit risk exposure and the increasing competition in the Korean and Asian reinsurance markets.
“The high leverage can be explained by the fact that approximately 60 percent of the retained premium is either life reinsurance or personal lines with no significant risk exposure and limited catastrophe exposure.”
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