A.M. Best Affirms Ratings of General Insurance Corporation of India
HONG KONG--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of General Insurance Corporation of India (GIC Re) (India). The outlook for both ratings is stable.
The ratings reflect GIC Re's solid risk-adjusted capitalization, consistently favorable investment results and its strong presence in the Indian and overseas reinsurance markets.
GIC Re's capital and surplus increased by approximately 10% for fiscal year 2012-13, and the company continued to maintain low underwriting leverage and sound liquidity. GIC Re’s risk-adjusted capitalization level remains strong and is supportive of its current rating level.
As the sole domestic reinsurer in India, GIC Re has a good understanding of the Indian non-life insurance market. For the year 2013-14, GIC Re’s premium income from the domestic market is expected to drop as a result of the change in obligatory cession to 5% from 10%. Nonetheless, this change may not negatively impact GIC Re’s underwriting results, as the underwriting performance of the Indian non-life insurance industry is expected to remain unsatisfactory in the near term. In overseas reinsurance markets, GIC Re’s business partners include insurers and reinsurers from key markets in Asia and Europe.
Offsetting these positive rating factors are GIC Re's high exposure to equity market volatility and increasing catastrophe exposure. The market value of GIC Re's equity investments was nearly half of its total invested assets. Volatility in the Indian equity market may have a direct impact on GIC Re's capitalization level through the fair value change account.
Global natural catastrophes in 2011 had a material impact on GIC Re's underwriting result. Although the Uttarakhand Floods in June 2013 and Cyclone Phailin in October 2013 in India are not expected to impact GIC Re’s operating results materially, it is important for GIC Re to further strengthen its catastrophe risk management capability.
Future upward rating actions could occur if GIC Re demonstrates the ability to achieve a consistently favorable underwriting performance and strengthen its investment and catastrophe risk management capability. Conversely, negative rating actions could occur if the company's risk-adjusted capitalization declines materially as a result of its unsatisfactory operating performance, or if there is a decline in its fair value change account.
The methodology used in determining these interactive ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
This rating announcement has been issued by A.M. Best Asia-Pacific Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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