AM Best has downgraded the financial strength rating (FSR) to B-plus-plus (good) from A-minus (excellent) and the long-term issuer credit rating (ICR) to bbb-plus from a-minus of General Insurance Corporation of India (GIC Re).
The outlook for FSR has been revised to stable from negative while the long-term ICR outlook is negative.
These credit ratings reflect GIC Re's balance sheet strength which AM Best categorises as strong as well as its adequate operating performance, favourable business profile and appropriate enterprise risk management.
The rating downgrades follow a deterioration in AM Best's view of GIC Re's balance sheet strength fundamentals. GIC Re's risk-adjusted capitalisation as measured by best capital adequacy ratio declined to the strong level at fiscal year-end 2020 as compared with the strongest level in fiscal year 2019 and prior.
This deterioration follows a 30 per cent decline in GIC Re's reported capital and surplus in fiscal year 2020 due to a significant fall in the market value of its equity investments as well as from the reporting of a full year operating loss.
Unfavourable movements in the fair value of GIC Re's investment holdings follow global volatility in investment markets in the face of the prevailing Covid-19 pandemic. At the same time, GIC Re's fast premium growth continues to outpace capital accumulation leading to lower risk-adjusted capitalisation.
In addition, GIC Re's regulatory solvency position at fiscal year-end 2020 was marginally above the regulatory minimum requirement.
Positive balance sheet strength considerations include the company's relatively modest underwriting leverage, its typically liquid investment portfolio and retrocession counterparties of high credit quality, said AM Best.
( With inputs from ANI )