HSBC Reinsurance is assigned an “AA” rating
Standard & Poor's has assigned its 'AA' counterparty credit and insurer financial strength ratings to Dublin-based HSBC Reinsurance (HSBC Re). The outlook is positive.
"We believe that HSBC Re benefits from the full, albeit implicit, support of its parent group, which will always act in a timely manner to ensure that HSBC Re is fully able to meet its obligations," said Standard & Poor's credit analyst David Anthony.
"The reinsurer is also satisfactorily capitalised on a standalone basis, and enjoys strong and traditionally stable earnings, and very strong liquidity and investments," he added.
Furthermore, HSBC Re benefits from attractive growth prospects as a following reinsurer of the primary life and non-life insurance operations of the global HSBC Insurance group, its joint-ventures, and its strategic partners.
The risks reinsured by HSBC Re essentially relate to the parent group's own banking customers and largely comprise creditor covers (that is, loan and credit card payment protection in the event of ill health, accident, or unemployment), as well as a growing book of mainly UK household property business, and some travel.
The current book of business can be broken down in premium terms as 63% creditor, 28% household, and 9% travel and is derived principally from the U.K. and Ireland but also from Canada, Italy, Hong Kong, Singapore, and Argentina.
The ratings and outlook assigned to HSBC Re are equalised and will remain in lock-step with core operating elements of the HSBC group.
Meanwhile, the standalone credit profile of HSBC Re is expected to be maintained in a manner consistent with an investment-grade rating.
"We consider that insurance will remain a dynamic element in the HSBC group strategy and that HSBC Re will not write business that is unrelated to the HSBC group, its customers or its strategic partners, and that the parent will increase capitalisation to accommodate any significant growth in underwriting volumes, maintaining solvency around 200%, but never less than 150% of the Irish regulatory minimum margin," said Anthony.
Although bad years will occur, strong underlying performance will confirm HSBC Re's role in retrieving some of the profits on risks that would otherwise have been wholly for the account of external reinsurers.