27.01.2016, 12:21
Fitch places ratings of Insurance Company Alliance Policy on Rating Watch Negative
OREANDA-NEWS. Fitch Ratings has placed Kazakhstan-based JSC IC Alliance Polis's (Alliance Polis) Insurer Financial Strength (IFS) rating of 'B' and National IFS rating of 'BB+ (kaz)' on Rating Watch Negative (RWN).
The placement on RWN follows Alliance Polis's decision to transfer most of its portfolio to a smaller local insurer JSC Insurance Company 'Standard' (IC 'Standard') from 1 February 2016. This decision reflects the intent of Alliance Polis's shareholder to withdraw from the insurance sector.
KEY RATING DRIVERS
According to the Kazakh regulation, Alliance Polis would need to obtain a written consent from every policyholder to be able to transfer each individual policy to IC 'Standard'. Fitch does not expect this to complete by 1 February 2016, which raises the possibility that at least some part of the portfolio will remain with Alliance Polis.
The liabilities relating to the expired workers compensation policies will remain on the balance sheet of Alliance Polis to be managed in run-off till end-2018. According to Alliance Polis's assessment these liabilities amount to KZT1.7bn.
Fitch will look to resolve the RWN upon the review of the independent actuarial assessment of the liabilities, in addition to the assessment of the liabilities to remain on the balance sheet of Alliance Polis and the distribution of assets covering the transferred and remaining liabilities as soon as the factual transfer is done.
Local regulation requires the accepting party, IC 'Standard', to comply with prudential requirements after the transfer. The regulatory approval has not yet been received, while an assessment of the assets, liabilities and required regulatory capital has yet to be completed.
Both Alliance Polis and IC 'Standard' had significant buffers in their regulatory solvency margin at 330% and 252% at end-November 2015, respectively. However, Alliance Polis's portfolio may put pressure on IC 'Standard's regulatory capital since the accepting party is a smaller company with only KZT2.4bn of net written premiums in 11M15, compared with KZT4.8bn written by Alliance Polis in the same period.
The commitment of Alliance Polis's shareholder to support the insurer, is also uncertain, should the liabilities managed in the run-off mode exceed the assessment made at the transfer.
RATING SENSITIVITIES
Failure to obtain regulatory approval for the transfer or, failure to receive policyholder acceptance for a significant part of the portfolio or, retention of assets of weaker quality to cover the remaining liabilities, will trigger a downgrade.
An upgrade is unlikely given the switch to the run-off mode and the willingness of the shareholder to cease activity in the insurance sector.
The placement on RWN follows Alliance Polis's decision to transfer most of its portfolio to a smaller local insurer JSC Insurance Company 'Standard' (IC 'Standard') from 1 February 2016. This decision reflects the intent of Alliance Polis's shareholder to withdraw from the insurance sector.
KEY RATING DRIVERS
According to the Kazakh regulation, Alliance Polis would need to obtain a written consent from every policyholder to be able to transfer each individual policy to IC 'Standard'. Fitch does not expect this to complete by 1 February 2016, which raises the possibility that at least some part of the portfolio will remain with Alliance Polis.
The liabilities relating to the expired workers compensation policies will remain on the balance sheet of Alliance Polis to be managed in run-off till end-2018. According to Alliance Polis's assessment these liabilities amount to KZT1.7bn.
Fitch will look to resolve the RWN upon the review of the independent actuarial assessment of the liabilities, in addition to the assessment of the liabilities to remain on the balance sheet of Alliance Polis and the distribution of assets covering the transferred and remaining liabilities as soon as the factual transfer is done.
Local regulation requires the accepting party, IC 'Standard', to comply with prudential requirements after the transfer. The regulatory approval has not yet been received, while an assessment of the assets, liabilities and required regulatory capital has yet to be completed.
Both Alliance Polis and IC 'Standard' had significant buffers in their regulatory solvency margin at 330% and 252% at end-November 2015, respectively. However, Alliance Polis's portfolio may put pressure on IC 'Standard's regulatory capital since the accepting party is a smaller company with only KZT2.4bn of net written premiums in 11M15, compared with KZT4.8bn written by Alliance Polis in the same period.
The commitment of Alliance Polis's shareholder to support the insurer, is also uncertain, should the liabilities managed in the run-off mode exceed the assessment made at the transfer.
RATING SENSITIVITIES
Failure to obtain regulatory approval for the transfer or, failure to receive policyholder acceptance for a significant part of the portfolio or, retention of assets of weaker quality to cover the remaining liabilities, will trigger a downgrade.
An upgrade is unlikely given the switch to the run-off mode and the willingness of the shareholder to cease activity in the insurance sector.
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