, South Korea
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Korea P&I Club underwriting profits to remain vulnerable: AM Best

This is despite mitigative actions done by the insurer.

Korea P&I Club’s (KP&I)underwriting profit continues to spiral despite following consecutive years of loss, insurance analyst AM Best revealed.

In a credit rating report, AM Best assessed that KP&I's balance sheet remains strong with its adequate operating performance, limited business profile and appropriate enterprise risk management. It also acknowledges the wide range of support the insurer receives from the government.

However, deteriorating underwriting profitability in recent years has severely impacted  KP&I’s performance.

ALSO READ: South Korean non-life insurers to suffer heavy loss August floods: Fitch

“After unprecedented large claim losses in 2019, the Club experienced high net reinsurance costs, after considering a ceding commission, and elevated claims frequency, which led to another net loss of KRW4.6b ($3.4m) and a combined ratio of 169% in 2021. Although its underwriting profitability has outperformed global protection and indemnity (P&I) players in prior years, two significant losses in recent years led to a deteriorated five-year average combined ratio of 114%, which no longer demonstrates a positive distinction from its peers,” AM Best said.

AM Best noted that KP&I has done several mitigative actions to restore its underwriting profit fundamentals, such as general premium increases, non-renewal of unprofitable policies and enhancing terms in major programs. 

“Whilst AM Best expects these initiatives to offset the potential volatility partially, underwriting performance is likely to remain vulnerable to high severity losses or increased claims frequency over the medium term. This is especially so under the Club’s current reinsurance structure, given its increased net retention and loss-sensitive commission scheme when compared with the pre-2019 loss event level,” AM Best said.
 

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