AM Best Affirms Himalayan Reinsurance Credit Ratings With Stable Outlook

KUALA LUMPUR, Feb 24 (Bernama) -- Global credit rating agency, AM Best has affirmed the financial strength rating of B+ (Good) and the long-term issuer credit rating of “bbb-” (Good) of Nepal’s Himalayan Reinsurance Limited (Himalayan Re), maintaining a stable outlook.

In a statement, AM Best said these credit ratings (ratings) reflected Himalayan Re’s balance sheet strength, which was assessed as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The company’s strong risk-adjusted capitalisation for the fiscal year ending July 16, 2023 (fiscal year 2023) is expected to improve to a very strong level in fiscal year 2024, as measured by Best’s Capital Adequacy Ratio.

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Shareholders’ equity surged by 194 per cent from 7.9 billion Nepalese rupees (US$61 million) in fiscal year 2023 to approximately 15.3 billion Nepalese rupees (US$118 million) in fiscal year 2024, based on provisional full-year financial results, supported by its public listing in January 2024. (US$1=RM4.41)

The company has a low-to-moderate risk investment portfolio, with a majority allocation to cash and term deposits, with the remainder mainly in fixed-income securities and public equities. However, risks related to severe earthquakes in Nepal and modelling uncertainties are mitigated by retrocession.

Himalayan Re’s operating performance is viewed as adequate, with consistent positive earnings since its inception. Despite a flood event in September 2024, the company is expected to maintain positive underwriting margins in fiscal year 2024.

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The company’s expense ratio has decreased due to its growing business scale, though future performance will depend on acquiring quality domestic business. Investment income is anticipated to remain the key contributor to earnings over the medium term.

Himalayan Re’s business profile is assessed as limited, as it mainly operates as a domestic reinsurer in Nepal. The company also benefits from a first right of refusal to domestic facultative reinsurance business to domestic reinsurers.

AM Best views the regulatory support during the company’s early years to be favourable to its strategic growth objectives as it matures. The underwriting portfolio is concentrated in property and engineering risks, and its geographical focus remains on Nepal, with plans for gradual diversification.

-- BERNAMA