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Fitch Affirms MAIPARK at IFS 'A-(idn)'; Outlook Stable
April 13, 2017 / 9:01 AM / 7 months ago

Fitch Affirms MAIPARK at IFS 'A-(idn)'; Outlook Stable

(The following statement was released by the rating agency) JAKARTA, April 13 (Fitch) PT Fitch Ratings Indonesia has affirmed PT Reasuransi MAIPARK Indonesia's National Insurer Financial Strength (IFS) Rating at 'A-(idn)'. The Outlook is Stable. 'A' National IFS Ratings denote a strong capacity to meet policyholder obligations relative to all other obligations or issuers in the same country, across all industries and obligation types. However, changes in circumstances or economic conditions may affect the capacity for payment of policyholder obligations to a greater degree than for financial commitments denoted by a higher rated category. KEY RATING DRIVERS The affirmation reflects MAIPARK's consistently sound operating performance, which is supported by robust capitalisation and enhanced risk management. The rating is constrained by MAIPARK's business concentration in the reinsurance of Indonesian earthquake risk, which leaves it exposed to catastrophe risk and a small market size compared with peers. The rating also takes into account MAIPARK's robust risk-based capitalisation, consistently favourable operating performance and a conservative investment portfolio. MAIPARK's niche business translates into small asset and premium size compared with other local reinsurers and those within the Asia-Pacific region. The company captured a market share of around 3% by total industry gross written premiums as of end-2016. MAIPARK has shown consistently strong capitalisation, with its local solvency ratio staying above 700% over the previous five years - well above the minimum 120% regulatory requirement. Its risk-based capitalisation (RBC) was 892% at end-2016 (2015:838%). A high level of capitalisation is required for MAIPARK to support growth and provide an adequate shock buffer in view of its specialisation in earthquake reinsurance. MAIPARK recorded a 13% fall in gross written premiums (GWP) in 2016 from the previous year due to tight business competition. However, MAIPARK expects its GWP to recover in 2017 since the company's cession limit has started to increase to 25% from 15%, effective from April 2017. Fitch expects the company to manage its top-line growth consistently and maintain a strict underwriting approach to support its business and operating performance. The reinsurer has successfully maintained its profitability, supported by moderate investment yields and effective cost management. Adequate retrocession coverage has also shielded it from underwriting volatility caused by several earthquake losses over the last few years. Its return on equity has remained above 20% over the last five years. MAIPARK's investment mix is highly liquid and conservative, with more than 60% of its invested assets comprising cash and deposits at end-2016. Some of the company's cash holdings are placed in banks rated below investment-grade or unrated, similar to other domestic reinsurers and insurers. The company has enhanced its risk management capabilities over the previous few years. For example, it has constructed an internal catastrophe modelling tool, launched an enterprise risk-management system and developed an internal audit unit effective in 2015 to monitor risks more closely. The Stable Outlook reflects Fitch's expectation that MAIPARK will maintain a sufficient capital buffer and adequate retrocession coverage to support its ongoing business growth and shield itself from potential shocks. RATING SENSITIVITIES Upgrade rating triggers include the ability to significantly enhance its market presence with less dependence on mandatory cession, further enrich its risk-management capabilities and sustain its operating profitability. Downgrade rating triggers include a significant deterioration in the reinsurer's premium sustainability, operating performance (with a combined ratio consistently above 100%) and capital relative to its business portfolio - that is, statutory risk-based capital below 300% for a sustained period - due to excessive growth or claims from catastrophe losses. A material increase in the company's net probable maximum losses relative to equity could also result in a rating downgrade. Contact: Primary Analyst Ghaida Gunarti Analyst +62 21 2988 6814 PT Fitch Ratings Indonesia DBS Bank Tower, 24th Floor, Suite 2403 Jl. Prof. Dr. Satrio Kav 3-5 Jakarta 12940 Committee Chairperson Jeffrey Liew Senior Director +852 2263 9939 Note to Editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(idn)' for National ratings in Indonesia. Specific letter grades are not therefore internationally comparable. Applicable criteria, 'Insurance Rating Methodology', dated 15 September 2016 and "National Scale Ratings Criteria", dated 7 March 2017 are available on Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: Additional information is available on Applicable Criteria Insurance Rating Methodology (pub. 15 Sep 2016) here National Scale Ratings Criteria (pub. 07 Mar 2017) here Additional Disclosures Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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