AM Best Affirms Credit Ratings of Labuan Reinsurance (L) Ltd

AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Labuan Reinsurance (L) Ltd (Labuan Re) (Malaysia). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Labuan Re’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

Labuan Re’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation that is expected to remain at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best views the company as having a moderate risk investment strategy with investment assets predominantly held in cash, deposits and high quality fixed-income instruments, albeit with a modest exposure to equities and real estate. Partially offsetting balance sheet factors include Labuan Re’s exposure to natural catastrophe risks relative to the size of its capital base, which emanates from its regional reinsurance operations and international operations through its participation in Lloyd’s of London syndicates.

AM Best views Labuan Re’s operating performance as adequate. Despite historically exhibiting elevated volatility as a result of catastrophe-related losses, its underwriting performance has improved over the past few years following remedial actions taken by management. The company recorded a large unrealised fair value investment loss in 2022 as a result of interest rate movements. Whilst asset value changes may drive short-term volatility, Labuan Re’s performance metrics are expected to remain aligned with the adequate assessment over the medium term.

AM Best assesses Labuan Re’s business profile as neutral given its position as a well-established regional non-life reinsurer. In addition, the company’s business profile continues to benefit from portfolio diversification from its participation as a corporate member in Lloyd’s of London syndicates. Labuan Re’s gross written premium had limited growth in recent years, partially due to planned reduction in its participation in Lloyd’s business. However, AM Best expects the company to record moderate growth over the medium term, driven by product initiatives and its positioning in a general hard reinsurance market. AM Best views the company’s ERM approach as appropriate given the current size and complexity of its operations.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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