HONG KONG--(BUSINESS WIRE)--A.M. Best has upgraded the financial strength rating to A (Excellent) from A- (Excellent) and the issuer credit rating to “a” from “a-” of Starr Property & Casualty Insurance (China) Company, Limited (Starr China) (China). The outlook for each rating remains stable.
The ratings reflect Starr China’s improved risk-adjusted capitalization and operating performance. In addition, Starr China receives business and operational support from Starr International Company, Inc. (SICO) and its insurance subsidiaries, and a capital commitment from Starr Insurance & Reinsurance Limited (SIRL), a company within SICO that is a 20% shareholder of Starr China. Starr China also assumes overseas treaty business ceded from SIRL, which accounted for over 30% of total gross premiums written in 2015.
Since SICO obtained managerial control over Starr China through its subsidiaries, the company has revamped its business strategy by running off its motor business and focusing on underwriting non-motor commercial and specialty lines using the underwriting expertise and capacity of its parent and affiliates. The company’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), improved significantly in light of a reduced premium risk. The elimination of the loss-making motor business and management’s effort to reduce operating costs have helped improve underwriting performance in 2015.
Partially offsetting these rating factors is the challenge to continue the improved underwriting performance under China’s competitive market conditions. Moreover, the stop-loss reinsurance arrangement with SIRL, which was in place to mitigate Starr China’s underwriting volatility over the past two years, terminates in 2016. Another offsetting factor is the increasing exposure in lower frequency and potentially high severity risks located domestically and abroad due to the change in portfolio mix, which may potentially increase the volatility in the company’s underwriting results.
While positive rating actions are not likely in the near term, negative rating actions could result from a material adverse deviation from the company’s business plan, a significant decline in the risk-adjusted capitalization, or a reduced level of support provided by SIRL or SICO.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.
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