AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Asian Reinsurance Corporation (Asian Re) (Thailand). The outlook of these Credit Ratings (ratings) is positive.

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

The positive outlooks reflect AM Best’s expectation that the successful execution of Asian Re’s business plan will lead to an improving trend in underwriting and operating performance metrics over the intermediate term.

Asian Re’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which was at the strongest level at year-end 2023, as measured by Best’s Capital Adequacy Ratio (BCAR), and is expected to remain at this level over the medium term. Notwithstanding, the company is viewed to have a modest absolute capital base of USD 73 million at year-end 2023 as compared with regional reinsurance peers, which increases the sensitivity of its balance sheet to shock events. A significant offsetting balance sheet strength factor remains Asian Re’s high risk investment strategy, which includes the holding of a sizeable balance of cash and deposits in a sanctioned country and in a country that defaulted on its sovereign debt. Although the company has reduced its holdings of some of these assets in recent years, AM Best views this investment strategy as creating increased liquidity and credit risk for Asian Re, as the imposition of existing and future sanctions and/or economic crisis in these respective countries drives a heightened risk of transfer restrictions and/or asset write-offs.

AM Best views Asian Re’s operating performance as marginal, albeit with an improving trend. The company’s operating performance has exhibited volatility in recent years, with a five-year average return-on-equity ratio of 1.5% and a combined ratio of 110.3% (2019-2023), as calculated by AM Best. The company has reported positive operating results in four of the past five years. Underwriting performance in 2020 was hampered by a reserve strengthening exercise and higher-than-expected claims experience. Following remediation actions undertaken by the company, the combined ratio improved to 101.6% in 2023 (2022: 103.3%), taking into account losses arising from the Turkey earthquake and Typhoon Doksuri. Prospectively, AM Best expects Asian Re to execute on a business plan aimed at improving underwriting results, which coupled with robust investment returns, is expected to support positive overall earnings prospectively.

AM Best views Asian Re’s business profile as limited, reflecting its position as a regional non-life reinsurer, with a modest-sized gross premium base of USD 26 million in 2023. The company writes treaty and facultative business in Asia, the Middle East and Africa. The company continues to grow its book of business, with a focus on improved diversification by geography and line of business, following a significant contraction in 2011 driven by severe catastrophe events and the subsequent need to recapitalise. Despite persistent market and regulatory challenges, Asian Re is expected to continue to implement several strategic initiatives and business partnerships aimed at expanding its underwriting portfolio and market presence over the medium term.

AM Best considers Asian Re’s ERM approach to be appropriate relative to the current size and complexity of its operations. The company continues to develop its risk management framework and has demonstrated improvements in its risk management capabilities over recent years.

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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