A.M. Best has removed from under review with negative implications and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb” of National Insurance Co. Ltd. (National) (India). The outlook assigned to these Credit Ratings (ratings) is negative.
On June 23, 2017, National’s Long-Term ICR was downgraded, and the company’s ratings were placed under review with negative implications following a notice from the regulator that the company has a significant reserve shortfall.
In subsequent discussions, National’s management has confirmed that the gross reserve deficiency on its long tail motor third party liability business stood at INR 19 billion as of Sept. 30, 2017 (20% of capital and surplus). This amount will be absorbed gradually in the period to March 31, 2019. Corrective actions taken by management include the appointment of an independent actuarial firm in early 2017 to improve the quality of National’s reserving practices. The negative outlooks reflect the inadequate reserves, continued uncertainty regarding the potential for further adverse development and the company’s poor underwriting performance over the past five years. In addition, the efficacy of corrective actions taken to strengthen National’s reserving and data quality remain to be seen.
