China Life Reinsurance Company (China Re Life) has established a new subsidiary in Hong Kong, named China Reinsurance (Hong Kong) Company (China Re HK). The new insurer, which focuses on life reinsurance business, has received its licence from the Hong Kong Insurance Authority.
AM Best says it has assigned a financial strength rating of A- (excellent) and a long-term issuer credit rating of “a-” to China Re HK. The outlook assigned to these ratings is stable.
China Re HK is a wholly owned subsidiary of China Life China Re Life, the domestic and international life and health reinsurance arm of China Reinsurance (Group) Corporation.
AM Best says that the ratings reflect China Re HK’s balance sheet strength, which the agency categorises as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also reflect the implicit and explicit support from China Re Life including capital, brand recognition, business development, investment, risk management and operational support.
China Re HK’s risk-adjusted capitalisation, as measured by Best’s capital adequacy ratio, is projected to remain at a robust level over the short to intermediate term. AM Best expects the company’s capital and surplus to strengthen gradually through full earnings retention, according to its five-year forecast.
The company has a prudent investment strategy with the majority of its investment assets allocated to short-term bonds of high credit quality. Notwithstanding, the overall investment risk exposure is expected to increase in tandem with the robust growth in the balance sheet.
China Re HK’s underwriting portfolio mainly consists of reinsurance treaties of short-term savings-type endowment products within Hong Kong, which are relatively low risk, albeit margins remain thin.
Partially offsetting rating factors include the higher business execution risk given the start-up nature of China Re HK and the continued strong market competition.
Separately, S&P Global Ratings says that it expects China Re HK to play an integral role in the China Re group’s overseas expansion strategy, particularly for life reinsurance offerings. The new subsidiary will leverage China Re’s established relationships with life insurance companies in Hong Kong. A
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