AM Best affirms credit ratings of KOREAN Reinsurance Company

13 December 2018 — press.release
AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of "a" of Korean Reinsurance Company (KRE) (South Korea). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect KRE's balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management.

KRE's very strong balance sheet strength is underpinned by its risk-adjusted capitalization being at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR). The very strong balance sheet assessment also is demonstrated by the stable trend in its solvency ratios on the statutory risk-based capital scheme and the company's internal capital model, and reflects the company's prudent investment strategy, as well as a conservative retrocession strategy. This is evident in the relatively modest earnings impact from the overseas catastrophe events in 2017 and 2018, as compared with regional and international reinsurer peers.

KRE has a track record of stable and adequate operating performance, with moderate profitability in terms of return on equity and its combined ratio. Given that the majority of KRE's business is generated from quota share treaties in personal lines, the company has a thin but stable underwriting profit margin due to the sliding scale commission and loss participation terms.

KRE maintains a strong presence in South Korea, with more than 60% market share in this insurance market in 2017, which AM Best expects will not be challenged in the short to medium term. KRE has a dominant market position in the domestic proportional business. While it is difficult for foreign reinsurers to challenge this market position, other areas within the reinsurance market remain competitive. With a strong foothold in South Korea, KRE is expanding into overseas markets in order to diversify its book of business, yet with a conservative risk appetite.

Positive ratings action could occur if there is sustained improvement in its operating performance or material improvement in capitalization.

Negative rating actions could occur if there is a material decrease in capitalization triggered by large-scale catastrophe losses, or if there is significant deterioration in its operating performance.
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