HONG KONG--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of NEWGT Reinsurance Company, Ltd. (NEWGT) (Bermuda). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect NEWGT’s balance sheet strength, which AM Best categorises as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
NEWGT’s strong balance sheet assessment is well-supported by its risk-adjusted capitalisation, which is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The assessment also reflects its modest capital base and conservative investment portfolio. Although the company has a moderate reliance on reinsurance, the associated risk is mitigated by its high quality and well-diversified reinsurance programme.
NEWGT’s underwriting results for its general account have been consistently positive, with a five-year average net loss ratio of 67% and a five-year average net combined ratio of 94%. For the fiscal year ended 31 March 2020, NEWGT’s net income from its general account decreased to JPY 171 million (USD 1.6 million) from JPY 214 million, mainly due to the short-term impact of its portfolio improvement initiative. Following the completion of its portfolio improvement this year and the closure of its run-off segregated account business in December 2019, AM Best believes the company’s underwriting results will remain profitable and gradually improve over time by focusing on its existing and profitable business.
NEWGT is a wholly owned subsidiary of Itochu Corporation, one of Japan’s largest general trading companies listed on the Tokyo Stock Exchange. For its general account, which forms the large majority of its business in terms of net premium written, NEWGT acts as a single-parent captive of Itochu to insure and reinsure the risks of affiliated companies within the Itochu group. In addition to Itochu-related business, the company also underwrites some third-party and non-marine related risks through its segregated account, which consists of well spread and less volatile lines such as motorcycle theft, renters insurance and group personal accident.
The types of risk underwritten by NEWGT may expose the company to low frequency and high severity losses. The company also identifies credit risk from third-party reinsurers as one of its key risks. However, AM Best believes the company has an appropriate risk management framework to manage these risks including its cautious underwriting approach, strict underwriting policies and a high quality reinsurance programme.
Negative rating actions could occur if NEWGT’s risk-adjusted capitalisation declines significantly, or if there is a substantial increase in losses caused by a material increase in risk appetite. Negative rating actions could also arise if there is any significant deterioration in Itochu Corporation’s credit profile, including its operating profitability, financial leverage and interest coverage level.
AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
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