Published on 14 Nov 2023.
RAM Ratings has released a new rating criteria for non-operating insurance holding companies (IHCs), which typically control one or more insurance and/or reinsurance companies. Our assessment of non-operating IHCs is anchored by the credit strength of their core insurance/reinsurance subsidiaries or associates given that IHCs usually do not have meaningful or substantial operations of their own, as well as IHCs’ financial leverage at the company level. We had previously drawn on the rating approach for bank holding companies in rating IHCs.
The credit standing of a non-operating IHC is generally subordinated to the creditors of its core operating subsidiaries or associates as the latter are highly regulated and access to their funds is restricted. However, if a non-operating IHC exhibits certain characteristics, including little or no indebtedness at the holding company level, the non-operating IHC’s ratings need not be notched down from the credit strength of the insurance group for structural subordination.
In our review of the rated insurers and related entities within RAM’s portfolio, the new rating approach could result in an upgrade for one of the non-operating IHCs in RAM’s rating portfolio. We will make the relevant rating announcement upon the finalisation of the rating exercise, which we expect to conclude this month.
The new criteria Rating Methodology for Non-Operating Insurance Holding Companies can be accessed under the Criteria & Methodology section of our website, www.ram.com.my.
Loh Kit Yoong
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