AM Best downgraded the financial strength rating to B++ (Good) from A- (Excellent) and the issuer’s long-term credit rating to “bbb+” (Good) from “a-” (Excellent) from
The ratings reflect the strength of KP&I’s balance sheet, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate management of business risks. The ratings also recognize the wide range of support the club receives from the
The rating downgrades reflect AM Best’s revision of KP&I’s operating performance to adequate from strong, following a deterioration in underwriting profitability over the past several years. After unprecedented large claims losses in 2019, the Club experienced high net reinsurance costs (after taking into account ceding commission) and high claims frequency, resulting in another net loss of
AM Best notes the mitigating measures taken by the Club to restore its underwriting profit fundamentals, such as general premium increases, non-renewal of unprofitable policies and improved conditions in key programs. While AM Best expects these initiatives to partially offset potential volatility, underwriting performance will likely remain vulnerable to high severity losses or increased claims frequency over the medium term. This is particularly true under the Club’s current reinsurance structure, given its increased net retention and loss-sensitive commission system compared to pre-2019 claims levels.
The balance sheet strength rating remains high, underpinned by KP&I’s highest level of risk-adjusted capitalization as measured by Best’s capital adequacy ratio (BCAR). The good valuation is also supported by its low underwriting leverage and a very cautious and liquid investment portfolio.
KP&I has a relatively small presence in the global P&I market compared to members of the
On the strength of its strategic role in supporting the sustainable development of maritime infrastructures in
Ratings are communicated to rated entities before publication. Unless otherwise indicated, the ratings have not been changed as a result of this communication.
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Source: AM Best