HONG KONG–(BUSINESS WIRE)–AM Best placed under review with negative implications the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” (Excellent) of Cathay Century Insurance Company Limited (Cathay Century) (Taiwan) .
This credit rating (rating) action is due to the company’s exposure to potentially large claims related to pandemic insurance policies amid the deteriorating COVID-19 situation in Taiwan and the uncertainty as to the extent of the negative impact on the company’s credit fundamentals.
Based on the latest available information provided by the company, Cathay Century’s regulatory capital solvency remained at a healthy level of 296% at the end of the first quarter of 2022. However, AM Best expects the full amount claims continues to grow and could potentially lead to a momentous event for the company. Nonetheless, AM Best expects Cathay Century to likely receive capital support from its ultimate parent, Cathay Financial Holding Co., Ltd., to rebuild its capital strength should a momentous event occur, given the strategic importance of the insurer for the group’s financial services platform. Nonetheless, the claims history of these pandemic insurance policies reveals shortcomings in the company’s enterprise risk management with respect to underwriting risk control and risk build-up management.
The ratings will remain under review with negative implications pending increased visibility of the level of ultimate loss from pandemic insurance and the magnitude of the impact on capital, as well as the level and speed of financial support from the parent company. AM Best will continue discussions with Cathay Century’s management team on claims development and contingency capital plans to assess the impact on the company’s credit profile.
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