Cathay Century Insurance Company Limited AM Best Places Credit Ratings Under Review With Negative Implications

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HONG-KONG, June 02, 2022–(BUSINESS WIRE)–AM Best placed under review with negative implications the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” (Excellent) of Cathay Century Insurance Company Limited (Cathay Century) (Taiwan) .

This credit rating (rating) action is due to the company’s exposure to potentially large claims related to pandemic insurance policies amid the deteriorating COVID-19 situation in Taiwan and the uncertainty as to the extent of the negative impact on the company’s credit fundamentals.

Based on the latest available information provided by the company, Cathay Century’s regulatory capital solvency remained at a healthy level of 296% at the end of the first quarter of 2022. However, AM Best expects the full amount claims continues to grow and could potentially lead to a momentous event for the company. Nonetheless, AM Best expects Cathay Century to likely receive capital support from its ultimate parent, Cathay Financial Holding Co., Ltd., to rebuild its capital strength should a momentous event occur, given the strategic importance of the insurer for the group’s financial services platform. Nonetheless, the claims history of these pandemic insurance policies reveals shortcomings in the company’s enterprise risk management with respect to underwriting risk control and risk build-up management.

The ratings will remain under review with negative implications pending increased visibility of the level of ultimate loss from pandemic insurance and the magnitude of the impact on capital, as well as the level and speed of financial support from the parent company. AM Best will continue discussions with Cathay Century’s management team on claims development and contingency capital plans to assess the impact on the company’s credit profile.

Ratings are communicated to rated entities before publication. Unless otherwise indicated, the ratings have not been changed as a result of this 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 relevant 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 more information on the use and limitations of credit rating opinions, please see Best’s Guide to Credit Ratings. For more information on the proper use of Best’s Credit Scores, Best’s Performance Ratings, Best’s Preliminary Credit Ratings, and AM Best’s press releases, please see the Guide to Proper Use of Best’s Best ratings and reviews.

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

Copyright © 2022 by AM Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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