Best Assigns ‘A’ Ratings to Starr International Insurance (Asia)

February 3, 2010

A.M. Best Co. has assigned a financial strength rating of ‘A’ (Excellent) and an issuer credit rating (ICR) of “a” to Hong Kong–based Starr International Insurance (Asia) Limited – both with stable outlooks.

Best said the ratings reflect Starr International Asia’s “sound operating plan, supportive risk-based capitalization and operating support in terms of underwriting, asset management, information technology implementation and reinsurance from affiliated entities of its parent, Starr Insurance & Reinsurance Limited (Starr International Insurance). The ratings also acknowledge explicit financial guarantee from its immediate parent and the company’s experienced management teams, which have a track record in the local insurance markets.”

Best also noted that Starr International Insurance plans to expand its geographical footprint in Asia since launching Starr International Asia in September 2009, with an initial capitalization of HKD 200 million ($25.6 million).

Starr International Asia will focus on a “spectrum of specialty lines— travel and personal accident, supplementary health, directors’ and officers’ liability, professional indemnity and product liability—where the group has product knowledge, underwriting experience and service capabilities. Regardless of its status as a new start-up in Asia, Starr International Asia will originate its business through the existing business network of its affiliates and business partner, C.V. Starr & Co., Inc.”

In addition Best pointed out that during its start up phase the company would protect itself from “undue risk exposure and underwriting volatility” by placing “various excess-of-loss and quota-share reinsurance coverages with its immediate parent and external reinsurers.

“Given the assumptions stated in the business plan and the target risk retention policy,” Best said it is of the opinion that “Starr International Asia’s capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is supportive of the premium growth and its overall risk profile over the next five years. The company’s net premium leverage is expected to be maintained at a reasonable level.”

There are, however, offsetting factors. Best noted that these include the “execution risk and uncertainty associated with the quality of the incoming new business. Although the support and guidance from its parent will somewhat mitigate operational risk, Starr International Asia is subject to the risk of whether the company is able to successfully execute the business plan.

“Additionally, whether Starr International Asia is able to achieve break-even during its early stage of operation will depend on the quality of the new book of business that it plans to generate in the future.”

In conclusion Best said it would “closely monitor the performance of Starr International Asia against its stated operating plan. Any material adverse deviations with regard to management, operating profitability, capitalization or risk profile could potentially undermine the stability of the assigned ratings.”

Source: A.M. Best –

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