HONG KONG–(BUSINESS WIRE)–AM Best placed under review with negative implications the financial strength rating of A (Excellent) and the issuer’s long-term credit rating of “a” (Excellent) of Hotai Insurance Co., Ltd. (Hotai Insurance) (Taiwan), given the company’s exposure to potentially large claims related to pandemic insurance policies amid the deteriorating COVID-19 situation in Taiwan, and the uncertainty about the extent of the negative impact on the company’s credit fundamentals.
Based on the latest available information provided by the company, Hotai Insurance’s risk-based capital ratio was 404.85% at the end of April 2022. However, AM Best expects the total amount of claims continues to develop and could potentially lead to a momentous event for the company. Nonetheless, AM Best expects Hotai Insurance to likely receive capital support from its ultimate parent company, Hotai Motor Co., Ltd. (Hotai Motor), to rebuild its capital strength if a major event occurs, given the strategic importance of the insurer for the group’s automobile. the business ecosystem, as well as the long-term operating and capital commitment provided by the immediate parent company of Hotai Insurance, as evidenced by a commitment letter. Nonetheless, the claims development of these pandemic insurance policies reveals the company’s enterprise risk management shortcomings in controlling underwriting risk and managing risk accumulation.
The ratings will remain under review with negative implications pending increased visibility of the level of ultimate loss from pandemic insurance and the magnitude of the impact on capital, as well as the level and speed of financial support from the parent company. AM Best will continue discussions with Hotai Insurance’s management team on claims development and contingency capital plans to assess the impact on the company’s credit profile.
Ratings are communicated to rated entities before publication. Unless otherwise indicated, the ratings have not been changed as a result of this communication.
This press release relates to credit ratings that have been published on AM Best’s website. For all rating information relating to the release and relevant disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Assessment Activity Web page. For more information on the use and limitations of credit rating opinions, please see Best Credit Score Guide. For more information on the proper use of Best’s Credit Ratings, Best’s Performance Ratings, Best’s Preliminary Credit Ratings, and AM Best’s press releases, please see Guide to Proper Use of Best’s Ratings and Reviews.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
Copyright © 2022 by AM Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.