AM Best has commented that the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of "a-" (Excellent) of Nan Shan General Insurance Co., Ltd. (Nan Shan General) (Taiwan) remain unchanged in view of the negative impact from pandemic insurance claims on the company’s financials as of the end of September 2022, based on AM Best’s expectation of the company’s business and capital plans over the short to intermediate term.
Nan Shan General’s reported capital and surplus declined by more than half during the first nine months of 2022 to TWD 2.0 billion. The main drag was a net loss of TWD 1.3 billion attributable to significant claims related to pandemic insurance products, as well as negative changes in other comprehensive income due to unfavourable capital market conditions. Nonetheless, the company’s local solvency ratio remained above the regulatory minimum as of the end of September 2022.
The company has experienced material adverse claims arising from pandemic insurance products and has provisioned additional claims reserves in the third quarter of 2022 for its in-force pandemic products based on more conservative assumptions. Nan Shan General’s ultimate claims amount remains uncertain and depends on Taiwan’s infection rate development and potential changes in the government’s pandemic policies in the next few months. AM Best expects the company will continue to maintain its solvency ratio above the regulatory minimum over the short to intermediate term as its risk-adjusted capitalisation remains supportive of the business plan.
Nan Shan General’s business scale is small within its parent, Nan Shan Life Insurance Co., Ltd, but it benefits from the distribution support from the parent’s life agency force in sourcing the majority of its premium revenue, in particular for personal line products such as voluntary motor. Moreover, AM Best views the parent as resourceful and willing to provide explicit and implicit financial support to Nan Shan General when needed.
AM Best will continue to monitor closely the pandemic insurance claims development and hold discussions with Nan Shan General’s management to evaluate any subsequent implications on the company’s rating fundamentals. Negative rating actions could occur if the company’s business and capital plans adversely deviate from AM Best’s expectation, to a point that the company’s risk-adjusted capitalization no longer supports the very strong balance sheet strength assessment.
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