HONG KONG--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Korea P&I Club (KP&I or the Club) (South Korea). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect KP&I’s balance sheet strength, which AM Best categorizes as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management. The ratings also reflect the wide range of support that the Club receives from the South Korea government.
KP&I’s risk-adjusted capitalization remains at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR). The Club has demonstrated a track record of healthy capital growth over the past five years. In 2018, KP&I’s capital and surplus grew by 7.4%, supported by its strong operating performance and full retention of net income.
KP&I has achieved highly profitable underwriting results over the past five years, although its performance in 2018 declined due to a drop in gross premium written and increased expenses. The Club continues to benefit from its conservative investment strategy, which yields a stable stream of interest income. In 2018, the depreciation of the South Korean Won against the U.S. dollar led to a foreign exchange gain, which had a positive impact on KP&I’s operating performance and net profit.
KP&I has a relatively small presence in the global P&I market in comparison to members of International Group of P&I Clubs as its business is highly concentrated in South Korea. Amid increasing competition in its domestic market, the Club has been working on multiple initiatives to secure its market position, including strategic partnerships with the International Group of P&I Clubs, a new business opportunity under the government’s plan to build new vessels to support South Korea’s shipping industry and overseas expansion.
AM Best considers KP&I’s risk management capabilities to be appropriate given its risk profile. The Club follows strict underwriting guidelines and maintains a conservative reinsurance strategy.
KP&I was founded in 2000 under the Ship Owners’ Mutual Protection and Indemnity Association Act. Aside from its strategic role in the long-term development of the country’s marine infrastructure, the Club benefits from various support measures by the South Korea government, including corporate tax exemption and government subsidies, which serve as positive rating factors.
Negative rating actions could occur if there is a material decline in the Club’s risk-adjusted capitalization or sustained deterioration in its operating performance.
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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