AM Best Cites Underwriting Volatility In Korea P&I Club's Outlook Revision

KUALA LUMPUR, May 13 (Bernama) -- AM Best has revised the outlook to negative from stable for the long-term issuer credit rating (Long-Term ICR) and affirmed the financial strength rating (FSR) of B++ (Good) and the long-term ICR of “bbb+” (Good) of Korea P&I Club (KP&I).

The outlook of the FSR is stable, and the credit ratings (ratings) reflect KP&I’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The global credit rating agency in a statement said the ratings also reflected the wide range of support that the company receives from the South Korean government.

The Long-Term ICR outlook revised to negative from stable reflects increased pressure on KP&I’s operating performance, following its sizeable net loss reported in 2024, which notably deviated from AM Best’s expectations.

KP&I experienced two exceptionally large claim losses last year, which led to a record annual 7.3 billion Korean won net loss and a combined ratio of 204 per cent in 2024. (1,000 South Korean won = RM3.03)

This elevated concern regarding underwriting volatility and high susceptibility of its bottom line to the large claims under the current structure of a small premium base, high net retention level, and a loss-sensitive commission scheme.

Furthermore, KP&I’s risk-adjusted capitalisation is assessed at the strongest level, as measured by Best’s Capital Adequacy ratio, and is expected to remain at that level over the intermediate term.

Despite a moderate drop in available capital following a significant net loss in 2024, the company’s balance sheet strength is supported by its low underwriting leverage and a highly conservative investment portfolio.

Underpinned by its strategic role to support the long-term development of maritime infrastructure in South Korea, KP&I receives a wide range of government support across various areas, including subsidies, corporate tax exemptions, and a no-dividend payout policy to its members.

-- BERNAMA