Moody’s reviews China’s Railway Captive rating

17-09-2021

Moody’s reviews China’s Railway Captive rating

shutterstock/Christian Badorff

Moody’s Investor Services has completed a periodic review of its ratings of the China Railway Captive Insurance Co, the ratings agency has announced.

The review, which doesn’t involve its rating committee, is instead a reassessment of the “appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers”. It does not change the credit ratings and outlook/review status and “is not an indication of whether or not a credit rating action is likely in the near future”, Moody’s stated.

Outlining the considerations impacting its rating, Moody’s states that the captive’s credit profile is highly correlated to its ultimate parent, the state-owned China State Railway Group Co. It also has strong capitalization while maintaining a liquid investment portfolio.

“Offsetting these strengths is the insurer’s growing exposure to large engineering and liability risks that could result in volatile underwriting profitability, given its limited use of reinsurance,” said Moody’s.

 “The profitability of its rapidly growing cargo insurance also remains to be tested,” it added.

In February, Moody’s affirmed its A3 insurance financial strength rating and stable outlook for the captive.  The rating reflected the short tail and low reserving risk of its key business lines, motor and personal accident insurance.

“However, the insurer’s underwriting profitability is volatile because of its concentrated exposure to its parent’s railway operations,” it noted at the time. “This volatility could intensify as the insurer grows the high-severity engineering and liability insurance with limited use of external reinsurance.”

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