AM Best expects Asian Re’s underwriting and operating performance to improve

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AM Best, a global credit rating agency for the insurance sector, has reaffirmed Asian Reinsurance Corporation (Asian Re), a regional non-life reinsurer, with a Financial Strength Rating of B+ (Good) and a Long-Term Issuer Credit Rating of “bbb-” (Good), both with a positive outlook.

am-best-logoAM Best expects that Asian Re’s execution of its business plan will improve its underwriting and operational performance metrics in the near term.

The reinsurer’s balance sheet is supported by strong risk-adjusted capitalisation, which remained at its highest level at year-end 2023 based on Best’s Capital Adequacy Ratio (BCAR), projected to remain stable over the medium term.

However, with a modest absolute capital base of USD 73 million as of year-end 2023 compared to regional peers, Asian Re is more sensitive to balance sheet shocks.

The rating agency also notes that the company’s investment strategy, which includes significant holdings in sanctioned and defaulted sovereign debt countries, adds liquidity and credit risk, subject to potential transfer restrictions or asset write-offs.

AM Best views Asian Re’s operational performance as improving, despite volatility, with a five-year average return-on-equity ratio of 1.5 percent and a combined ratio of 110.3 percent (2019-2023).

Despite challenges, the company achieved positive operating results in four of the past five years, with a 2023 combined ratio of 101.6 percent (2022: 103.3 percent), accounting for losses from the Turkey earthquake and Typhoon Doksuri.

Future prospects depend on executing a business plan aimed at strengthening underwriting results alongside strong investment returns, says AM Best.

Asian Re maintains a limited business profile as a regional non-life reinsurer with a 2023 gross premium base of USD 26 million, operating in Asia, the Middle East, and Africa. Strategic initiatives are underway to enhance market presence and diversify underwriting following a contraction in 2011, necessitating recapitalisation due to catastrophic events.

AM Best considers Asian Re’s enterprise risk management as effective, evolving with operational complexity, and enhancing risk management capabilities in recent years.

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