Best’s News & Research Service - June 01, 2022 11:21 AM (EDT)
AM Best Affirms Credit Ratings of Consumer Insurance Services Limited
- June 01, 2022 11:21 AM (EDT)
Singapore //BestWire// - AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Consumer Insurance Services Limited (CISL) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect CISL’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, very limited business profile and appropriate enterprise risk management (ERM). The ratings also factor in a neutral impact from the company’s ultimate ownership by humm group limited.
The company’s insurance operations are presently in run-off. In the fourth quarter of 2021, CISL communicated to its policyholders, informing them of the company’s decision to cancel all remaining card repayment insurance policies from 1 July 2022. However, to support policyholders, it will continue to pay eligible claims that occur up to and including 31 December 2022. Subsequent to this, CISL is targeting to relinquish its insurance licence in early 2023.
CISL’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Despite the company’s run-off status, AM Best expects the company to maintain its local regulatory solvency position at an appropriate level until such point that it relinquishes its insurance licence. In addition, the company’s investment strategy is expected to remain conservative, with invested assets consisting solely of cash and short-term deposits.
AM Best considers CISL’s operating performance to be adequate. The company reported a five-year average return-on-equity ratio of 34% (fiscal years 2017 to 2021), albeit with a moderate level of volatility over this period. Following the cancellation of all remaining insurance policies, CISL will cease receiving premium revenue, with operating results over the near term expected to be driven by investment income, claims settlements and operating expenses.
AM Best views CISL’s business profile as very limited. The company is currently in run-off, after ceasing writing new business from November 2018 and renewal business from April 2019. AM Best views CISL’s ERM framework as appropriate given the current size and complexity of its operations. AM Best continues to monitor the impact of potential regulatory challenges in relation to the conduct and culture review by New Zealand regulatory bodies, as any resulting increase in regulatory or operational risk could drive a mismatch between CISL’s risk management profile and capability.
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 Performance Assessments, 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.