Best’s News & Research Service - September 21, 2017 11:28 AM (EDT)
A.M. Best Affirms Credit Ratings of Standard Insurance Company JSC
- September 21, 2017 11:28 AM (EDT)
London //BestWire// - A.M. Best has affirmed the Financial Strength Rating of C++ (Marginal) and the Long-Term Issuer Credit Rating of “b+” of Standard Insurance Company JSC (Standard) (Kazakhstan). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Standard’s volatile risk-adjusted capitalisation, track record of weak technical performance and limited business profile in Kazakhstan’s non-life insurance market. The ratings also take into account Standard’s underdeveloped risk management framework.
In line with A.M.Best’s expectations, the company’s risk-adjusted capitalisation declined materially in 2016, due to higher underwriting risk following its absorption of a major part of the insurance portfolio of Alliance Polis Insurance Company JSC (Alliance Polis). As at half-year 2017, Standard’s risk-adjusted capitalisation improved, following the non-renewal of a significant part of the recently absorbed portfolio. However, risk-adjusted capitalisation remains relatively low, as measured by Best’s Capital Adequacy Ratio (BCAR) and as demonstrated by a regulatory solvency margin of 1.27 as of Aug. 1, 2017 (compared to a minimum requirement of 1.00).
In 2016, the company’s underwriting performance improved, benefiting from a material rise in net written premium. The company reported technical profit for the first time since 2012, when it was acquired by the current shareholders, and reported a combined ratio of 87.6% (2015: 120.9%). However, A.M. Best believes that the company will report an underwriting loss once again in 2017, due to the expected reduction in premium income and the ongoing impact of elevated expenses.
In 2016, Standard’s market share improved as a result of the absorption of Alliance Polis’s insurance portfolio and the addition of a number of large fronted contracts. As of Jan. 1, 2017, the company ranked 11th out of 25 non-life insurers in Kazakhstan, up from 15th a year earlier, with gross written premium of KZT 9.0 billion (approximately USD 27 million) and a market share of 3.3%. The company’s prospective market ranking will depend on the retention levels of the new client base and the competitive conditions in Kazakhstan’s insurance market.
The rating actions also reflect Standard’s underdeveloped risk management framework, specifically with regard to monitoring its risk accumulations within Kazakhstan’s earthquake-exposed areas. As a result, uncertainty exists as to the ability of Standard’s reinsurance programme to adequately protect the company against a catastrophic event.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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