SINGAPORE--(BUSINESS WIRE)--A.M. Best has downgraded the Financial Strength Rating (FSR) to C- (Weak) from B- (Fair) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “cc” from “bb-” of Capital Life Insurance Company Limited (CLI). Concurrently, A.M. Best has downgraded the FSR to C++ (Marginal) from B- (Fair) and the Long-Term ICR to “b+” from “bb-” of Capital General Insurance Company Limited (CGI). Additionally, A.M. Best has placed these Credit Ratings (ratings) under review with negative implications. Both companies are subsidiaries of Capital Insurance Group Limited (CIGL) and domiciled in Papua New Guinea.
The rating downgrades of CLI follow an internal control failure relating to medical claims processing, which has resulted in a requirement for substantial reserve strengthening. While claims were paid to policyholders as they came due, A.M. Best expects a material decline in the company’s capital position for full-year 2017. Consequently, A.M. Best expects CLI’s risk-adjusted capitalization to deteriorate to a very weak level, as measured by Best’s Capital Adequacy Ratio (BCAR). In addition, this control failure has weakened A.M. Best’s assessment of the company’s enterprise risk management (ERM).
The rating downgrades of CGI also follow a revision in A.M. Best’s assessment of the company’s ERM. While it is noted that CGI and CLI’s businesses operate independently, and no contagion of the processing issue seen at CLI is expected at CGI, both have a common risk management, governance and control framework that has been deficient in preventing a key control risk at CLI.
The under-review with negative implications status applied to CLI’s and CGI’s ratings reflects the uncertainty that remains around the finalization of their year-end 2017 financial positions as well as prospective expectations. In order to resolve the under-review status, A.M. Best expects to conduct a full assessment of the medium-term balance sheet strength and operating performance fundamentals of CLI, CGI and CIGL. In addition, A.M. Best will undertake a further review of the risk management practices at CLI and CGI and consider the remedial actions being implemented by management.
The ratings of CLI reflect its very weak balance sheet strength assessment, as well as its strong operating performance, limited business profile and weak ERM. CGI’s ratings reflect its strong balance sheet strength assessment, as well as its strong operating performance, limited business profile and weak ERM.
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