AM Best assigns Himalayan Reinsurance Limited Credit Ratings

KUALA LUMPUR, Feb 14 -- Global credit rating agency, AM Best has assigned a Financial Strength Rating of B (Fair) and a Long-Term Issuer Credit Rating of ‘bb+’ (Fair) to Himalayan Reinsurance Limited (Himalayan Re) Nepal.

The outlook assigned to these Credit Ratings (ratings) is stable, based on a statement.

The ratings reflect Himalayan Re’s balance sheet strength, which United States-based AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

Himalayan Re’s balance sheet strength assessment is underpinned by risk-adjusted capitalisation that is expected to remain at the strongest level for its first five years of operations, as measured by Best’s Capital Adequacy Ratio (BCAR).

AM Best views the company’s initial capitalisation of NPR 7 billion (US$59 million) in paid-up capital to be supportive of the company’s planned growth over its five-year start up phase (US$1 = RM4 189).

Additionally, financial flexibility is expected to be enhanced by the company’s plan for public listing over the near to medium term. AM Best expects the company to maintain a low-risk investment portfolio, with a majority allocation to cash and term deposits, and the remainder mostly in fixed income securities. Offsetting balance sheet considerations include the company’s exposure to severe catastrophe events, albeit the risk is mitigated in part through the use of retrocession.

AM Best views the company’s operating performance as adequate. As a start-up reinsurer, operating performance is exposed to potential volatility arising from elevated operational risk and business execution risk. Himalayan Re’s underwriting performance is projected to face negative pressure in the early years, in part driven by high initial expenses and a lack of business scale, although a gradual improvement is expected.

Himalayan Re’s business profile is assessed as limited. As a new domestic reinsurer, the second in the Nepal’s market, Himalayan Re lacks an established market position and is expected to face increasing competition as it grows its market share.

AM Best expects the company’s business growth to benefit from regulatory developments, including a first right of refusal to domestic reinsurance business that has been provided to domestic reinsurers, including Himalayan Re. The underwriting portfolio is expected to show line of business concentration toward property and engineering risks.

For more information, visit www.ambest.com.

-- BERNAMA