Over the next two years, S&P Global Ratings anticipates Central Reinsurance Corp. to retain its capital and earnings at the current, extremely strong level.
S&P notes that Central Re recorded underwriting losses for the first half of 2022 as a result of related claims and additional reserve provisions made for COVID-related policies that it reinsured in 2021 in a report titled "Asia-Pacific Reinsurance Sector Update: Volatility Ahead For Risks And Returns" that was published last week. In addition, due mostly to the low valuation of investments, Central Re's reported common equity decreased from NT$16.6 billion at the end of 2021 to NT$13.8 billion ($429 million) by the end of June 2022.
However, a significant portion of equity investments sold in the first half of 2022 with capital gains will offset losses from COVID-related policies. Additionally, the upcoming capital-raising strategy for the business, which is anticipated to be finished before the end of 2022, will restore the reinsurer's capitalization to its pre-COVID level.
Subscribing outcomes
By making adequate underwriting profits, making proactive capital plans, and exercising careful risk management when managing investment exposure, according to S&P, Central Re can sustain its credit profile over the next two years.
Since all of the reinsured policies expired before May 2022, any effects from the COVID-related policies are expected to be one-time only. Central Re's underwriting performance for its core businesses remained steady and profitable when COVID-related products were excluded. Over the previous five years until 2021, Central Re has maintained good combined ratios, averaging 94%. According to S&P, the ratio will surpass 100% in 2022, signaling underwriting losses brought on by COVID-related claims. But in 2023, Central Re is probably going to get back to producing satisfactory underwriting outcomes.
Profile
As the sole domestic reinsurance provider, Central Re enjoys a dominant position in the Taiwanese reinsurance industry, according to S&P. Relationships with regional life and non-life insurers are still close, as seen by Central Re's strong market position and capacity to win reputable clients. The reinsurer's objective of diversifying its portfolio by investigating the global reinsurance market has not changed, but its appetite for high growth and catastrophe risks abroad has.
Over the next one to two years, Central Re is projected to maintain a stable portfolio both domestically and internationally with a focus on underwriting profits.
The following ratings have been given to Central Re by S&P:
Rating for Financial Stability: A/Stable/—
Rating for Issuer Credit: A/Stable/—
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