US credit rating agency AM Best has maintained Korea P&I Club’s financial strength score at “A- excellent”, despite two costly claims this year.
It also held the insurer’s outlook rating at “stable”.
AM Best described Korea P&I’s balance sheet as “strong” and noted its conservative approach to investment.
Premium hit
“[Korea P&I] has achieved highly profitable underwriting results over the past five years, although its performance in 2018 declined due to a drop in gross premium written and incurred expenses,” AM Best said.
“The club continues to benefit from its conservative investment strategy, which yields a stable stream of interest income.”
The rating agency said the club had increased both capital and surplus by 7.4% in 2018, adding that earnings were helped by a favourable exchange rate between the US dollar to South Korea won.
It also praised Korea P&I’s “strict underwriting guidelines” and “conservative reinsurance strategy”.
Looking forward, AM Best said Korea P&I could also be a beneficiary under a South Korean government plan to build ships to support the expansion of the nation’s ocean-going fleet.
The club continues to benefit from its conservative investment strategy, which yields a stable stream of interest income
AM Best
The ratings will come as a relief to executives at Korea P&I after the club was involved in two costly, high-profile claims this year.
High-profile claims
The club was the main insurer for the 74,000-dwt Solomon Trader (built 1994), which grounded on Rennell Island, off the Solomon Islands, close to a Unesco World Heritage site in February.
There was some initial pollution and concerns that wreck removal could cause further environmental damage. However, the pollution was contained, and the wreck was successfully refloated by Resolve Marine in May.
In a separate incident, Korea P&I was the insurer on the 1,600-teu KMTC Hongkong (built 1998), which had a cargo fire at the port of Laem Chabang in Thailand in June.
Korea P&I is not a member of the International Group of P&I Clubs but has ambitions to join.
However, it has access to the International Group’s reinsurance scheme via a strategic tie-up with the Standard Club.
There have been several changes to the financial ratings of P&I insurers over the summer.
Rating changes
As TradeWinds reported, Standard and Poor’s (S&P) upgraded the outlook on the BBB+ rating of the Japan P&I Club from “stable” to “positive” to reflect improved capital strength of the Tokyo-based mutual.
However, S&P downgraded the outlook of the London P&I Club’s BBB rating from “stable” to “negative” after it reported an underwriting loss and reduction in capital for the 2018 policy year.
