Best’s News & Research Service - December 15, 2021 09:46 AM (EST)
AM Best Affirms Credit Ratings of Peak Reinsurance Company Limited and Its Subsidiary
- December 15, 2021 09:46 AM (EST)
Hong Kong //BestWire// - AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Peak Reinsurance Company Limited (Peak Re) (Hong Kong) and its subsidiary, Peak Reinsurance AG (Switzerland). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Peak Re’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Peak Re’s balance sheet strength is underpinned by its robust level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital and surplus grew significantly in 2020 due to the issuance of perpetual subordinated guaranteed capital securities of USD 250 million during the year. The company’s capital position has also benefited from historical capital injections from its shareholders and the full retention of earnings over the past five years. Peak Re possesses favourable financial flexibility, as demonstrated by an enhanced level of underwriting capacity provided by third-party capital via its sidecar, Lion Rock Re Ltd. Other supportive factors of the balance sheet strength include its overall prudent investment risk profile, financial agility in formulating a comprehensive retrocession programme and strong liquidity.
Peak Re has reported favourable operating results over the past five years. The non-life combined ratio has exhibited an improving trend despite losses arising from multiple catastrophes during the period. Net losses from major events in 2021, including Hurricane Ida, Winter Storm Uri and the European flooding are expected to be manageable due to the company’s effective protection from its retrocession programme. Investment returns from interest and dividend income also have contributed to the overall operating earnings.
The company underwrites a diversified non-life portfolio by product line and geography, with a focus on the Asia-Pacific region. Leveraging its underwriting acumen, the company aims to expand its U.S. casualty business selectively and continue growing its non-proportional treaty business. With its life reinsurance business, the company focuses on broadening its revenue, in particular, medical reimbursement products, through active client engagement, product innovation and new channel strategies.
Partially offsetting rating factors include the exposure to severe catastrophe events, upward pressure in retrocession costs and increased capital market volatility. AM Best expects Peak Re will maintain a robust level of risk-adjusted capitalization to support its ongoing business expansion, while continuing to adopt disciplined underwriting and prudent investment strategies to strengthen its operating performance over the short to intermediate term.
The company is well-positioned at the current rating levels. Negative rating actions may occur if there is a material deterioration in the company’s risk-adjusted capitalization, or if there is a deteriorating trend in its operating results. A deterioration in the credit profile of Fosun International Holdings Ltd., Peak Re’s major shareholder, may also impose a negative impact on Peak Re’s ratings.
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 Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.