KUALA LUMPUR, March 20 (Bernama) -- AM Best has revised the implications of the under review status to negative from developing for the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of Hotai Insurance Co Ltd (Hotai Insurance), Taiwan.
The Credit Ratings (ratings) reflect Hotai Insurance’s balance sheet strength, which AM Best assessed as weak, as well as its adequate operating performance, neutral business profile and marginal enterprise risk management.
In a statement, AM Best said the ratings also reflected the support that the company received from its ultimate parent, Ho Tai Motor Co Ltd (Ho Tai Motor).
The ratings were placed under review with developing implications on Dec 2, 2022 pending increased visibility of the pandemic insurance ultimate loss level and the magnitude of capital impact, as well as the level and timeliness of financial support from the parent.
The revision of the implications of the under review in this rating action reflects the larger-than-expected shortfall between the latest development of ultimate claims amount and potential further capital support from the parent, Ho Tai Motor, based on information provided by Hotai Insurance.
With a significantly downsized capital and surplus to support the growing underwriting portfolio, AM Best expects the company’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio, to remain at the very weak level over the short to intermediate term.
The local regulator announced that effective March 20, 2023, only infections that exhibit moderate to severe symptoms are qualified as pandemic cases. The ratings agency expects this will help to partially alleviate the claims pressure faced by Hotai Insurance, albeit the magnitude remains uncertain.
AM Best will continue to hold discussions with Hotai Insurance’s management team on claims development, contingency capital and business plans to assess the impact to the company’s credit profile.
-- BERNAMA
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