Korean Re maintains a strong presence in South Korea, with a share of more than 60% in this insurance market in 2017, which AM Best expects will not be challenged in the short to medium term.
The reinsurer has a dominant market position in the domestic proportional business. While it is difficult for foreign reinsurers to challenge this market position, other areas within the reinsurance market remain competitive, says A.M.Best as it has affirms the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Korean Re. The outlook of these credit ratings is stable.
With a strong foothold in South Korea, Korean Re is expanding into overseas markets in order to diversify its book of business, yet with a conservative risk appetite.
The ratings reflect Korean Re’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, favourable business profile and appropriate enterprise risk management.
The very strong balance sheet assessment is demonstrated by the stable trend in the reinsurer's solvency ratios on the statutory risk-based capital scheme and the company’s internal capital model, and reflects the company’s prudent investment strategy, as well as a conservative retrocession strategy. This is evident in the relatively modest earnings impact from the overseas catastrophe events in 2017 and 2018, as compared with regional and international reinsurer peers.
Moody's also says that Korean Re has a track record of stable and adequate operating performance, with moderate profitability in terms of return on equity and its combined ratio. Given that the majority of its business is generated from quota share treaties in personal lines, the company has a thin but stable underwriting profit margin due to the sliding scale commission and loss participation terms.