AM Best upgrades Asian Re

AM Best has upgraded the issuer credit rating of Asian Re to bb+ from bb and affirmed its financial strength rating of B (Fair). The outlook for both ratings is also now positive.

The rating agency said the upgrade recognises the continued initiatives by Asian Re to strengthen its capital, which have restored the company’s capital position and significantly reduced the risk of adverse development from outstanding Thai flood claims.

Asian Re’s event retentions are small relative to its strengthened capital base and its risk-adjusted capitalization is well supportive of its ratings, it added.

Offsetting rating factors include transfer restrictions on deposits that represent a substantial proportion of its capital. While the company has been able to maintain positive underwriting results after 2012, managing expenses against significantly reduced business volumes is a key challenge.

The removal of transfer risk on the company’s deposits and continued improvement in underwriting performance could result in positive rating action.

A significant deterioration in Asian Re’s capital position from catastrophe losses could result in downward pressure to the ratings, AM Best added.