AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of New Zealand Medical Indemnity Insurance Limited (NZMII) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect NZMII’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

NZMII’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which was at the strongest level as of 31 March 2025 (fiscal year-end 2025), as measured by Best’s Capital Adequacy Ratio (BCAR). Prospective risk-adjusted capitalisation remains sensitive to the pace of the company’s business growth and the size of future dividend distributions. Additionally, the company’s balance sheet strength is supported by its conservative investment portfolio, consisting mainly of cash and fixed-income securities. Partially offsetting factors include the company’s small absolute capital base, which increases the sensitivity of capital to shock events, and its limited financial flexibility.

NZMII’s operating performance is assessed as adequate, supported by a return-on-equity ratio of 13.9% and a net/net combined ratio of 80.2% in fiscal year 2025, as calculated by AM Best. NZMII’s earnings are supplemented by healthy investment income, with a net investment yield (including gains) of 4.4% in fiscal year 2025. Prospectively, AM Best expects NZMII’s operating performance to remain supportive of the adequate assessment.

AM Best assesses NZMII’s business profile as limited given its position as a small and niche insurer in New Zealand providing medical indemnity insurance to medical practitioners and health professionals. The company’s claims consist largely of legal fees excluding medical injury costs. As a monoline insurer with operations in a single country, AM Best views NZMII as having limited geographic and product diversification. Access to new business is supported by the company’s affiliation with the New Zealand Resident Doctors’ Association.

NZMII’s ERM is assessed as appropriate given the size and complexity of its operations and risk profile. The company has moderate exposure to operational risks as it has outsourced most of its operations to third-party service providers. However, these risks are partially mitigated through a selection of high-quality providers and contractual agreements to ensure the continuity of services. Over the medium term, AM Best expects NZMII's ERM framework to continue evolving in response to the changing regulatory environment and its growing operational scale.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

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