Asia Pacific re/insurers saw more rating upgrades than downgrades in 2023, says AM Best

Long-Term Issuer Credit Rating (Long-Term ICR) upgrades exceeded downgrades for AM Best-rated Asia-Pacific re/insurers in 2023, primarily driven by improved balance sheet strength and favorable operating performance.

A new report released by AM Best reveals that eight Long-Term ICRs were upgraded in 2023 with four downgraded on a range of factors, which includes falling Best’s Capital Adequacy Ratio (BCAR) scores and weakening operating results.

However, its worth noting that the rating agency assigned 10 new ratings in the region during the year.

It’s important to highlight that AM Best’s geographical rating coverage across Asia and Oceania is broad, and more than 75% of the agency’s ICRs for Asia-Pacific rating units carried a Long-Term ICR of “a-” or higher, with mature markets skewing more favorably than emerging markets.

David Lopes, senior industry research analyst, AM Best, commented: “Mature markets generally have more stable economic conditions and insurers may face fewer underwriting risks due to better-established risk management practices, more-accurate actuarial modeling and a deeper understanding of market dynamics.”

“At the same time, emerging markets typically have simpler insurance products, resulting in lower probability of adverse claims development, and low insurance penetration,” he added.

Moreover, AM Best’s Asia-Pacific reinsurance reportedly achieved strong non-life revenue growth and favourable earnings in 2023, which was primarily supported by a more stable investment environment and benign catastrophe activity.

According to the agency, large Asian reinsurers have adjusted their catastrophe capacity offerings in their home markets to minimise their catastrophe exposures, while others have also deployed a mature market growth strategy to capture the
benefits of material rate increases.

Regardless of elevated catastrophe activity in recent years, the majority of outlooks on Asia-Pacific rating units were stable at year-end 2023, at 87%, though AM Best notes that a larger proportion of those stable outlooks were for organisations operating in mature markets than emerging-market participants.

Of the outlook revisions that did occur in 2023, most were moved to positive from stable and on companies operating in mature markets; in particular, New Zealand and Singapore, the agency added.

In fact, the types of companies rated, operating in mature and emerging markets, are diverse and include reinsurers, insurers, mutuals, captives, credit and health insurers, takaful operators and protection and indemnity (P&I) clubs.

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