(The following statement was released by the rating agency)
Jan 15 -
Summary analysis -- India International Insurance Pte. Ltd. ------- 15-Jan-2013
CREDIT RATING: Country: Singapore
Local currency A-/Stable/--
Primary SIC: Fire, marine, and
Credit Rating History:
Local currency Foreign currency
15-Jun-2010 A-/-- --/--
24-Jan-2007 BBB+/-- --/--
The ratings on Singapore-based India International Insurance Pte. Ltd. reflect the insurer's strong capitalization and underwriting performance, and its good liquidity and conservative investments. India International's small, albeit improving, share of Singapore's fragmented non-life insurance market and the company's high use of reinsurance temper these strengths.
We expect India International's capitalization to remain strong relative to its risk profile and the capitalization of the insurer's peers in Singapore in the next few years based on our capital analysis. We expect the insurer's business and risk profile to remain relatively stable, with single digit growth over the next one to two years.
We view India International's operating performance as strong despite some deterioration in recent years due to losses in motor class and international hull businesses. The insurer's overall underwriting performance is likely to remain profitable, with a combined ratio of no more than 95% in 2012. This is despite a deterioration in the ratio in the first half of the year. The insurer's expense ratio was low at 9.4% in 2011 and benefitted from reinsurance commissions.
In our view, India International has a conservative and liquid investment portfolio. About 52% of the portfolio as of Dec. 31, 2011, is in cash. Bonds together with deposits held in various Indian banks and higher-rated regional banks account for 26.8% of the portfolio. The insurer is susceptible to volatility in foreign exchange rates, given that its deposits are denominated in foreign currency. However, these assets provide a good match to India International's claim liabilities arising from offshore businesses (usually denominated in U.S. dollar).
We expect India International to maintain its competitive position with modest increases in premiums. Nevertheless, the competitive advantage is likely to be limited in the saturated non-life insurance market in Singapore. The insurer is the sixth-largest in the country, with a 3.1% market share in terms of total gross premiums for Singapore insurance funds in 2011 (3.6% in 2010). India International is one of the largest marine hull underwriters in Singapore. The insurer has grown its motor business in recent years.
India International's high reliance on reinsurance increases its credit risk, in our view. The insurer retains only 46.2% of gross premiums, lower than its peers. Nevertheless, its higher reinsurance usage has been for larger risks; i.e marine hull.
We expect India International to continue to prudently manage its expansion. The insurer has a long history of writing offshore direct and inward facultative reinsurance businesses--mainly from ASEAN (Association of Southeast Asian Nations) countries, Korea, and Taiwan--as well as the marine hull and cargo business. Nevertheless, in our view, the offshore businesses carry higher risk than the local business.
Enterprise risk management
India International's enterprise risk management is adequate in our view. The insurer's risk management is rather traditional, but its risk control is adequate to meet its relatively simple risk profile. While India International does not have a designated risk officer, the management team meets regularly to review the business position based on the underwriting results. The insurer deploys traditional methods of underwriting and manages risk through computer-controlled aggregated risk limits. Claim management is also within the computer system, which provides daily updates.
The stable outlook reflects our expectation that India International's capitalization will remain strong while the insurer continues to grow its business cautiously with a satisfactory underwriting and overall operating performance.
We are unlikely to raise the rating on India International in the next 18 months. Nevertheless, we could raise the rating if the insurer significantly improves its market position in the local industry while continuing to report strong underwriting results and capitalization. We may lower the rating if India International's underwriting performance and business profile deteriorates significantly, affecting its capital position, while the insurer grows its gross premiums written.
Related Criteria And Research
-- Refined Methodology And Assumptions For Analyzing Insurer Capital Adequacy Using The Risk-Based Insurance Capital Model, June 7, 2010
-- Interactive Ratings Methodology, April 22, 2009
-- Group Methodology, April 22, 2009