The ratings reflect Hotai Insurance’s balance sheet strength, which AM Best rates as weak, reasonable operational performance, neutral business profile and marginal enterprise risk management (ERM). The ratings also reflect the support the company has received from its ultimate parent, Ho Tai Motor Co., Ltd. (Ho Tai Motor) receives.
The ratings downgrade reflects the material deterioration in Hotai Insurance’s risk-adjusted capital position from the strongest level in 2021 to the very weak level in the 2022 year-end forecast, as measured by Best’s capital adequacy ratio (BCAR). This is mainly driven by the very material claims Pandemic insurance products that exceeded the sum of Ho Tai Motor’s two capital injections
Looking ahead, AM Best expects capital and bonus growth to resume through full accumulation of profits from its profitable non-pandemic insurance business, although it is unlikely to return to pre-COVID levels in the short to medium term. In addition, the company’s ERM rating was revised from fair to marginal to reflect the company’s losses, which were higher than the industry average, which revealed its deficiencies in corporate governance related to product risk and accumulation risk control. The impacts under review with evolving impacts reflect the uncertainty surrounding the final level of damage caused by Taiwan’s COVID-19 development and possible changes in the government’s pandemic policy in the coming months, as well as potential further capital support from Ho Tai Motor if needed depends .
Leveraging its long-standing relationship with Toyota Motor Corporation, Ho Tai Motor is the leading automobile dealership in
Ratings will continue to be reviewed, with implications evolving, pending improved visibility of the ultimate pandemic insurance loss level and the magnitude of the capital impact, as well as the level and timeliness of parent financial support. AM Best will continue to have discussions with Hotai Insurance’s management team on claims development and potential further contingency capital plans, if necessary, to assess the impact on the company’s credit profile.
Ratings are communicated to rated companies prior to publication. Unless otherwise stated, the ratings have not changed since this announcement.
This press release relates to ratings published on AM Best’s website. All ratings information relating to the press release and relevant disclosures, including details of the office responsible for issuing each rating referenced in this press release, can be found on AM’s recent ratings activity webpage Best. For more information on the use and limitations of credit ratings, see Best’s Guide to Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Ratings, Best’s Preliminary Credit Ratings and AM Best press releases, see Guide to Proper Use of Best’s Ratings & assessments
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