The risk-adjusted capitalisation of China Taiping Insurance (HK) Company [CTPI(HK)] was at the strongest level as of year-end 2024, as measured by Best's Capital Adequacy Ratio (BCAR), and is expected to remain robust over the short to intermediate term, according to AM Best.
The international credit rating agency said CTPI HK’s capitalisation would remain strong that even after absorbing the financial impacts from the recent major fire at Wang Fuk Court, a residential complex in Hong Kong’s northern district of Tai Po. AM Best believes the ultimate net claims amount from this event will be manageable for CTPI (HK), supported by its prudent reinsurance arrangement with a reinsurer panel of sound credit quality. AM Best also believes that CTPI (HK) is equipped with abundant liquidity to support the claim payments from this event.
Ratings affirmed
AM Best has affirmed CTPI (HK)’s Financial Strength Rating of 'A' (Excellent) and the Long-Term Issuer Credit Rating of 'a' (Excellent). The outlook of these credit ratings is stable.
The ratings reflect CTPI (HK)’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 ratings also incorporate the rating enhancement that CTPI (HK) receives from its parent, China Taiping Insurance Holdings Company Limited (CTIH).
Impact of fire disaster claims on operating results
The company’s operating performance is assessed as adequate. Over the past decade, the company has delivered net profits with the exception of 2020, when there was a major impairment loss from its private funds. In addition, AM Best expects a material portion of the gross claims arising from the aforementioned fire incident to be transferred to reinsurers. The net retained loss amount is expected to be manageable for CTPI (HK), albeit negatively impacting the company’s underwriting result over the short term. Notwithstanding, AM Best anticipates that CTPI (HK)’s operating performance will remain at the adequate level.
Looking ahead, AM Best expects the company’s underwriting margin to remain thin, while its bottom line will continue to be supported by investment income.
Business profile
AM Best assesses CTPI (HK)’s business profile as neutral. The company has been a longstanding player in Hong Kong’s highly competitive general insurance segment. Its market share was 5.1% in terms of direct premiums written in 2024. CTPI (HK) maintains a diversified underwriting portfolio in terms of business lines, primarily consisting of fire, accident and health, motor and general liabilities. The company underwrites direct and inward reinsurance business. Over the past four years, CTPI (HK) has reduced its reliance on inward business by increasing domestic direct premiums.
Looking ahead, AM Best expects CTPI (HK) to maintain its market position in Hong Kong and continue to build a balanced portfolio focusing on direct business over the short to medium term.
CTPI (HK) is a strategically important overseas operating subsidiary of CTIH and China Taiping Insurance Group. (TPG). The company plays a vital role in TPG’s footprint overseas and its strategy in the Greater Bay Area. CTPI (HK) is integrated into the group’s capital management and ERM. Additionally, CTPI (HK) receives a series of implicit support from the wider Taiping group, including brand recognition, investment, reinsurance, risk management and operations. AM Best believes CTIH will be supportive of CTPI (HK) in handling the recent fire loss.
The stable outlooks reflect AM Best’s expectation that the Wang Fuk Court fire is unlikely to change the rating fundamentals of the company over the intermediate term.