Hikari Tsuchin’s captive gets rating affirmed after capital boost
AM Best has affirmed the financial strength rating of A- (Excellent) of PanAsia Reinsurance. The outlook of these ratings is stable.
PanAsia Re is the Hawaii-domiciled captive of Hikari Tsuchin, a Japanese holding company which operates in the office automation and telecommunications sectors.
PanAsia Re’s balance sheet strength was assessed as very strong, which reflects its projected risk-adjusted capitalisation as measured by Best’s Capital Adequacy Ratio (BCAR), which is expected to be at the strongest level for fiscal-year 2025 and beyond for the medium term, supported by sizable capital injection from the parent in mid-2025.
AM Best said the assessment is additionally underpinned by PanAsia Re’s strong capital growth trajectory, low reinsurance dependence and conservative investment portfolio.
The company’s capital base has grown significantly over the last five years, expanding 102.9% between fiscal-year 2020 and fiscal-year 2024, driven by internally generated capital from profitable underwriting and capital infusion from the parent.
PanAsia Re’s adequate operating performance assessment is based on its operating profitability with double-digit average returns on equity and favourable combined ratio over the last five years, according to the ratings agency.
The captive’s small amount and short-term insurance (SASTI) business, which constitutes the majority of its underwriting portfolio, typically has loss ratios below 25%, although AM Best said it bears relatively high commission expenses payable to its parent.
It stated PanAsia Re expects a gradual expansion of its SASTI business, while also exploring non-SASTI opportunities to increase and diversify its premium base with sustainable profitability, although there is some uncertainty regarding the volatility of newer operations facing limited historical experience.
Currently, PanAsia Re operates under a captive license, which allows reinsuring risks from the group companies, as well as selected third-party business upon regulatory approval.
The ratings agency said the company’s limited business profile assessment reflects its modest business scale, as well as its product lines and geographic concentration writing small personal property damage and health and accident policies mainly emanated from Japan. PanAsia Re has a risk management framework that is largely integrated with its parent.
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