Insurer to pay $366m for claims
Churches and heritage buildings insurer Ansvar has settled $366 million of claims with big claimants.
That news came in comments from international ratings agency AM Best which yesterday said it had downgraded Ansvar New Zealand, now ACS Ltd, saying that the insurer's capitalisation remained "stressed" and it was vulnerable to any further increases in claims estimates.
ACS had told AM Best it had not yet submitted final solvency calculations, as of June 30, to the Reserve Bank, and it remained to be seen whether those calculations would comply with new regulatory requirements, AM Best said in a report on ACS issued yesterday.
The ratings agency said it had seen the draft calculations the company had lodged with the central bank.
"While these show a positive regulatory solvency margin, it is thin and the RBNZ has publicly voiced concerns on ACS' regulatory solvency."
Ansvar NZ was flooded with earthquake-related claims for more than $700 million after the February 2011 Canterbury earthquake, prompting it to withdraw from the New Zealand insurance market at the end of last year. It changed its name to ACS (Ansvar Claims Services) as it now operates only as a claims management business.
The downgrade reflected the vulnerability of ACS's capital position and the transfer of majority ownership away from its British former parent company Ecclesiastical Insurance Office (EIO), which removed the chance of any further financial support from EIO.
That left ACS vulnerable to any further increases in claims estimates, especially if they increased to more than ACS's extended reinsurance coverage of $570 million, which could weaken its ability to fully meet policyholder claims, the agency said.
However ACS had recently told the ratings agency that it had reached agreement on cash settlement amounts totalling $366 million with major policyholders and expected to settle major claims by December 31.
It is the second time in four months that AM Best has downgraded ACS's credit rating, which is an assessment of the company's ability to meet its payment obligations.
AM Best has downgraded ACS from B+ (good) to B- (fair) and issuer credit rating from "bbb-" to "bb-", under review with developing implications, which reflects the near-term risk the insurer faced in terms of whether it will comply with new statutory solvency requirements for insurers.
Cash settlement of major claims would reduce the impact and chance of any increases in claims costs.
- © Fairfax NZ News
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