AM Best Downgrades Credit Ratings of Bangkok Insurance Public Company Limited

AM Best has downgraded the Financial Strength Rating to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Rating to “bbb+” (Good) from “a-” (Excellent) of Bangkok Insurance Public Company Limited (Thailand) (BKI). The outlook of these Credit Ratings (ratings) has been revised to stable from negative.

The ratings reflect BKI’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The rating downgrades reflect a deterioration in AM Best’s view of BKI’s operating performance fundamentals. In 2021, the company reported a marked increase in its combined ratio to 102% from 87% as its loss ratio rose to 72% from 56%. In 2021, BKI’s underwriting performance was impacted by a high frequency of claims relating to COVID-19 health policies covering lump-sum payment product in particular, although this experience was offset partially by the company’s strong performance in its core lines of business such as motor, industrial all risks, and fire insurance. AM Best expects BKI’s combined ratio to remain elevated at least over the near term, resulting in a weakening of the company’s overall earnings.

BKI’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), remained at the strongest level at year-end 2021, albeit it declined moderately as compared with the prior-year result. While the company is dependent on reinsurance to support the underwriting of large and complex risks, its reinsurance panel is of high credit quality and well-diversified. However, BKI’s balance sheet remains exposed to high market risk given the company’s significant investment allocation to a few equity holdings, which has resulted in some volatility in the company’s capital and surplus over the past five years.

BKI is the third-largest non-life insurer in Thailand in terms of direct premium written, with an approximately 8.6% share of the market in 2021. The company benefits from a strong brand name that has been built over its long operating history and good market penetration. In terms of business mix, the company’s underwriting portfolio is dominated by motor and commercial risks.

AM Best considers the company’s ERM framework overall to be appropriate given the size and complexity of its operations. The company assumed excessive product risk through writing lump-sum COVID-19 policies resulting in a significant negative financial impact. BKI has ceased offering such policies since June 2021, limiting further negative development. In addition, all the lump-sum COVID-19 policies are expected to expire in the second quarter of 2022.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that 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 pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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