SINGAPORE--(BUSINESS WIRE)--AM Best has removed from under review with negative implications and downgraded the Financial Strength Rating (FSR) to C (Weak) from B (Fair) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “ccc+” (Weak) from “bb+” (Fair) of PT Asuransi Jasa Indonesia (Asuransi Jasindo) (Indonesia). The outlook assigned to the FSR is stable while the outlook assigned to the Long-Term ICR is negative.
These Credit Ratings (ratings) reflect Asuransi Jasindo’s balance sheet strength, which AM Best assesses as weak, as well as its marginal operating performance, neutral business profile and marginal enterprise risk management (ERM).
The ratings of Asuransi Jasindo were placed under review with negative implications on 19 May 2021, following a significant deterioration in the company’s underwriting performance emanating from its credit insurance business. On 8 July 2021, the ratings were downgraded and maintained under review with negative implications, following a delay in the finalisation of the company’s 2020 audited financial statements and AM Best’s increased concern over the loss exposure from the company’s credit insurance business.
The latest rating actions follow the finalisation of the company’s 2020 audited financial statements, which included restatements of prior financial years. The company’s latest financial position shows a significant capital erosion from outsized losses in its credit insurance business. The rating downgrades reflect a weakening of AM Best’s view of Asuransi Jasindo’s balance sheet strength and operating performance fundamentals.
Asuransi Jasindo’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), has deteriorated to a very weak level as of year-end 2020. In addition, Asuransi Jasindo’s local regulatory solvency ratio has turned negative and fallen significantly below the minimum regulatory requirement in 2020 and year-to-date 2021. AM Best expects the company’s capital adequacy to remain under pressure over the near term with subsequent improvement subject to the timely and successful execution of capital management actions being planned and implemented by the company.
AM Best’s balance sheet strength assessment of weak also factors the company’s heightened reinsurance counterparty credit risk as a result of its high reinsurance usage and exposure to domestic reinsurers that are not rated on an international financial strength rating scale.
The operating performance assessment of marginal reflects the company’s under-performance and earnings volatility in recent periods. Underwriting performance has demonstrated significant deterioration over recent periods, driven by unfavourable claims experience from the company’s credit insurance business, which has been materially impacted by the COVID-19 environment.
The company’s ERM is considered to be marginal. AM Best views the profile of some key risks as exceeding Asuransi Jasindo’s risk management capabilities. Recent technical losses raise concern over inadequacies in underwriting controls and governance. Weaknesses in capital management are highlighted by the company's inability to meet minimum regulatory requirements at present.
The negative outlook of the Long-Term ICR reflects AM Best’s expectation of continued pressure on the company’s balance sheet strength, operating performance and ERM fundamentals over the intermediate term. While Asuransi Jasindo’s management team continues to implement a turnaround strategy aimed at restoring capital adequacy and improving prospective operating performance, significant execution and downside risks remain at present.
This latest rating action is the result of an accepted appeal from Asuransi Jasindo.
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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