HONG KONG--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of “a” of Central Reinsurance Corporation (Central Re) (Taiwan). The outlook for each rating remains stable.
The rating affirmations reflect Central Re’s strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), stable and positive underwriting results (after compulsory auto liability insurance (CALI) reserve release) in recent years and its competitive advantage being the sole domestic commercial reinsurer in Taiwan’s reinsurance market.
Central Re maintains a solid risk-adjusted capitalization level, and the recent Tainan earthquake had little impact on its risk-based capitalization. The company’s underwriting performance after the CALI reserve release is positive and stable since 2013 mainly due to the absence of severe catastrophe losses. The CALI business on its own has suffered ongoing underwriting losses; however, Central Re’s net profit has not been negatively impacted, as the CALI underwriting losses have been offset by a special CALI reserve release.
Offsetting rating factors include the challenges Central Re faces in the current soft market conditions and its potential capital volatility from overseas catastrophe loss exposures. Central Re retains most of the overseas catastrophe loss exposures, which are supported by its capital and special reserves. Should a severe overseas catastrophe loss occur, Central Re’s capital level could be lowered by a relatively high percentage compared with its regional peers.
Positive rating actions for Central Re are unlikely in the near term. Negative rating actions could occur if potential capital volatility continues to increase.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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