AM Best Affirms Credit Ratings of Korean Reinsurance Company

HONG KONG, December 09, 2022--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of "a" (Excellent) of Korean Reinsurance Company (KRE) (South Korea). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect KRE’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, favourable business profile and appropriate enterprise risk management.

KRE’s risk-adjusted capitalisation is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital showed solid growth in 2022, despite some unrealised losses from its available-for-sale bond holdings, supported by recent issuances of hybrid bonds to prepare for new accounting and solvency regimes (IFRS 17 and K-ICS), as well as to support its growing business. AM Best notes that the impact of recent rising interest rates on the company’s capital was not material due to relatively short durations of its bond assets and a large share of held-to-maturity securities. KRE’s balance sheet strength is also supported by good accessibility to capital market and a conservative investment strategy.

KRE’s underwriting performance remained relatively stable despite a thin margin, mainly due to a large proportion of domestic personal lines business with loss-sensitive commission structures. While the performance of its domestic commercial line business remained favourable in 2021/2022 due to a hardening of the market and the company’s tightened underwriting, its overseas performance deteriorated in recent periods driven by an increase in COVID-19 claims and natural catastrophes. AM Best expects the company’s pandemic-related losses to gradually abate, as already seen in its claims experience in the second half of 2022. KRE plans to reduce its exposure to property catastrophe risks overseas, while trying to expand non-catastrophe business lines such as casualty and specialty lines. Meanwhile, robust investment income, which is generated mainly from fixed-income securities, provides a sufficient buffer to the overall bottom line supported by its expanding asset base.

The company ranked the 13th in the global reinsurance market in terms of gross written premium (GWP) in 2021, supported by its dominant position in South Korea’s reinsurance market and its growing overseas business. Despite the recent decline in domestic market share following its portfolio restructuring to improve profitability, AM Best believes that KRE’s market leadership will remain unchallenged over the medium term. The company’s overseas business increased gradually and accounted for more than a quarter of its consolidated GWP in recent years, mainly through the company’s continued efforts in global expansion, especially to Europe, and North and Latin America in recent years.

Negative rating actions could occur if there is a material decline in KRE’s risk-adjusted capitalisation, triggered by incidents such as multiple medium- or large-scale catastrophe losses retained in a fiscal year. Negative rating actions could also occur if there is a sustained deteriorating trend in the company’s operating performance.

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. For more information, visit www.ambest.com.

Copyright © 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Contacts

Chanyoung Lee
Associate Director, Analytics
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chanyoung.lee@ambest.com

Christie Lee
Senior Director, Analytics
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Christopher Sharkey
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Al Slavin
Senior Public Relations Specialist
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