AM Best has upgraded the Financial Strength Rating to B++ (Good) from B+ (Good) and the Long-Term Issuer Credit Rating to “bbb” (Good) from “bbb-” (Good) of Asian Reinsurance Corporation (Asian Re) (Thailand). The outlook of these Credit Ratings (ratings) has been revised to stable from positive.

The ratings reflect Asian Re’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 (ERM).

The rating upgrades reflect Asian Re’s sustained improvement in operating performance in recent years, evidenced by a return-on-equity ratio of 9.4% in 2024 (2023: 4.6%). The company has achieved positive operating results in four of the last five years. Underwriting performance in 2020 was hampered by a reserve strengthening exercise and higher-than-expected claims experience. However, the combined ratio improved to 85.3% in 2024 (2023: 101.6%) following remediation actions undertaken by the company. The company’s investment returns, arising mainly from interest income, have consistently supported operating earnings. Prospectively, AM Best expects Asian Re’s operating performance to be supported by sound underwriting profitability and robust investment returns.

Asian Re’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which was at the strongest level at year-end 2024, as measured by Best’s Capital Adequacy Ratio (BCAR), and is expected to remain at that level over the medium term. Notwithstanding, the company is viewed to have a relatively modest absolute capital base of USD 76 million at year-end 2024, as compared with regional reinsurance peers, which increases the sensitivity of its balance sheet to shock events. A significant offsetting balance sheet strength factor remains Asian Re’s high-risk investment strategy, which includes the holding of a sizable balance of cash and deposits in a sanctioned country and, to a much lesser extent, in a country that historically defaulted on and subsequently restructured its sovereign debt. Although the company has been actively reducing its holdings of some of these assets in recent years, AM Best’s view is this investment strategy exposes Asian Re to heightened credit and liquidity risks.

AM Best views Asian Re’s business profile as limited, reflecting its position as a regional non-life reinsurer, with a modest-sized gross premium base of USD 26 million in 2024. The company writes treaty and facultative business in Asia, the Middle East and Africa. The company continues to grow its book of business, with a focus on improved diversification by geography and line of business. Despite persistent market and regulatory challenges in some of the markets where it operates, Asian Re is expected to continue to implement several strategic initiatives and business partnerships that are aimed at expanding its underwriting portfolio and market presence over the medium term.

AM Best considers Asian Re’s ERM approach to be appropriate relative to the current size and complexity of its operations. The company continues to develop its risk management framework and has demonstrated improvements in its risk management capabilities over recent years.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

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