Best's Ratings: Definitions

Best's Ratings: Definitions Country Risk Tiers (CRT) AM Best defines country risk as the risk that country- the most risk and, therefore, the greatest challenge specific factors could adversely affect the claims to an insurer’s financial stability, strength, and paying ability of an insurer. Country risk is evaluated performance. and factored into all of Best’s Credit Ratings. AM Best’s Country Risk Tiers are not credit ratings Countries are placed into one of five tiers, ranging and are not directly comparable to a sovereign debt from “CRT-1” (Country Risk Tier 1) for countries with a rating, which evaluates the ability and willingness of stable environment with the least amount of risk, to a government to service its debt obligations. “CRT-5” (Country Risk Tier 5) for countries that pose

Country Risk Tier (CRT) Definition CRT-1 Predictable and transparent legal environment, legal system, and business infrastructure; sophisticated financial system regulation with deep capital markets; mature insurance industry framework. CRT-2 Predictable and transparent legal environment, legal system, and business infrastructure; sufficient financial system regulation; mature insurance industry framework. CRT-3 Developing legal environment, legal system, and business environment with developing capital markets; developing insurance regulatory structure. CRT-4 Relatively unpredictable and nontransparent political, legal, and business environment, with underdeveloped capital markets; partially to fully inadequate regulatory structure. CRT-5 Unpredictable and opaque political, legal, and business environment, with limited or nonexistent capital markets; low human development and social instability; nascent insurance industry. A Country Risk Tier (CRT) is not a credit rating; rather, it represents a component of AM Best’s credit rating methodology that is applied to all insurers. A CRT is not a recommendation to purchase, hold, or terminate any security, insurance policy, contract, or any other financial obligation issued by a government, insurer, or other rated issuer, nor does it address the suitability of any particular policy, contract, or other financial obligation for a specific purpose or purchaser.

Country Risk Categories AM Best Country Risk Reports are designed to provide a brief, high-level explanation of some of the key factors that determine a country’s Country Risk Tier assignment. It is not intended to summarize AM Best’s opinion on any particular insurance market or the prospects for that market. Country Risk Reports provide “scores” for three categories of risk for each country: (1) Very Low; (2) Low; (3) Moderate; (4) High and (5) Very High.

Category of Risk Definition Economic Economic risk is the risk that fundamental weaknesses in a country’s economy will cause Risk adverse developments for an insurer. AM Best’s assessment of economic risk evaluates the state of the domestic economy, government finances, and international transactions, as well as prospects for growth and stability. Political Political risk is the risk that government or bureaucratic inefficiencies, societal tensions, Risk inadequate legal system or international tensions will cause adverse developments for an insurer. Political risk comprises the stability of the government and society, the effectiveness of international diplomatic relationships, the reliability and integrity of the legal system and of the business infrastructure, the efficiency of the government bureaucracy, and the appropriateness and effectiveness of the government’s economic policies. Financial Financial system risk (which includes both insurance and non-insurance financial system risk) System is the risk that financial volatility may erupt because of inadequate reporting standards, a weak Risk banking system or asset markets, or poor regulatory structure. It also takes into account the risk that the level of the insurance industry’s development and public awareness, transparent and effective regulation and reporting standards, and a sophisticated regulatory body will contribute to a volatile financial system and compromise an insurer’s ability to pay claims.

REINSURANCE DIRECTORY OF ASIA 2020 21 Best's Ratings: Definitions (Continued) Best's Long-Term Issuer Credit Rating (ICR) A Best's Issuer Credit Rating (ICR) is an independent credit risk of an entity. Credit risk is the risk that opinion of an entity's ability to meet its ongoing an entity may not meet its contractual financial financial obligations and can be issued on either a obligations as they come due. An ICR does not long- or short-term basis. address any other risk. A long-term ICR is an opinion of an entity's ability In addition, an ICR is not a recommendation to meet its ongoing senior financial obligations, to buy, sell or hold any securities, contracts or any while a short-term ICR is an opinion of an entity's other financial obligations, nor does it address the ability to meet its ongoing financial obligations with suitability of any particular financial obligation for a original maturities generally less than one year. specific purpose or purchaser. An ICR is an opinion regarding the relative future An ICR may be displayed with a rating identifier or modifier that denotes a unique aspect of the opinion. Rating Rating Rating Category Categories Symbols Notches* Definitions Exceptional aaa – Assigned to entities that have, in our opinion, an exceptional ability to meet their ongoing senior financial obligations. Superior aa aa+ / Assigned to entities that have, in our opinion, a superior ability to meet aa– their ongoing senior financial obligations. Excellent a a+ / Assigned to entities that have, in our opinion, an excellent ability to a- meet their ongoing senior financial obligations. Good bbb bbb+ / Assigned to entities that have, in our opinion, a good ability to meet bbb– their ongoing senior financial obligations. Fair bb bb+ / Assigned to entities that have, in our opinion, a fair ability to meet their bb– ongoing senior financial obligations. Credit quality is vulnerable to adverse changes in industry and economic conditions. Marginal b b+ / Assigned to entities that have, in our opinion, a marginal ability to b– meet their ongoing senior financial obligations. Credit quality is vulnerable to adverse changes in industry and economic conditions. Weak ccc ccc+ / Assigned to entities that have, in our opinion, a weak ability to meet ccc– their ongoing senior financial obligations. Credit quality is vulnerable to adverse changes in industry and economic conditions. Very Weak cc – Assigned to entities that have, in our opinion, a very weak ability to meet their ongoing senior financial obligations. Credit quality is very vulnerable to adverse changes in industry and economic conditions. Poor c – Assigned to entities that have, in our opinion, a poor ability to meet their ongoing senior financial obligations. Credit quality is extremely vulnerable to adverse changes in industry and economic conditions.

• Best's Long-Term Issuer Credit Rating categories from "aa" to "ccc" include Rating Notches to reflect a gradation within the category to indicate whether credit quality is near the top or bottom of a particular Rating Category. Rating Notches are expressed with a"+" (plus) or"–" (minus).

Best's Financial Strength Rating (FSR) A Best's Financial Strength Rating (FSR) is an specific liability contractually borne by the policy or independent opinion of an insurer's financial contract holder. strength and ability to meet its ongoing insurance An FSR is not a recommendation to purchase, policy and contract obligations. hold or terminate any insurance policy, contract or An FSR is not assigned to specific insurance any other financial obligation issued by an insurer, policies or contracts and does not address any nor does it address the suitability of any particular other risk, including, but not limited to, an insurer's policy or contract for a specific purpose or purchaser. claims-payment policies or procedures; the ability In addition, an FSR may be displayed with a rating of the insurer to dispute or deny claims payment identifier, modifier or affiliation code that denotes a on grounds of misrepresentation or fraud; or any unique aspect of the opinion.

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22 REINSURANCE DIRECTORY OF ASIA 2020 Best's Financial Strength Rating (FSR) (Continued)

Rating Rating Rating Category Categories Symbols Notches* Definitions Superior A+ A++ Assigned to insurance companies that have, in our opinion, a superior ability to meet their ongoing insurance obligations. Excellent A A– Assigned to insurance companies that have, in our opinion, an excellent ability to meet their ongoing insurance obligations. Good B+ B++ Assigned to insurance companies that have, in our opinion, a good ability to meet their ongoing insurance obligations. Fair B B– Assigned to insurance companies that have, in our opinion, a fair ability to meet their ongoing insurance obligations. Financial strength is vulnerable to adverse changes in underwriting and economic conditions. Marginal C+ C++ Assigned to insurance companies that have, in our opinion, a marginal ability to meet their ongoing insurance obligations. Financial strength is vulnerable to adverse changes in underwriting and economic conditions. Weak C C– Assigned to insurance companies that have, in our opinion, a weak ability to meet their ongoing insurance obligations. Financial strength is very vulnerable to adverse changes in underwrtting and economic conditions. Poor D – Assigned to insurance companies that have, in our opinion, a poor ability to meet their ongoing insurance obligations. Financial strength is extremely vulnerable to adverse changes in underwrtting and economic conditions.

* Each Best's Financial Strength Rating Category from "A+" to "C" includes a Rating Notch to reflect a gradation of financial strength within the category. A Rating Notch is expressed with either a second plus '+" or a minus"–".

Disclaimers © AM Best Company (AMB) and/or its licensors and affiliates. ratings do not address any other risk, including but not limited to, All rights reserved. liquidity risk, market value risk or price volatility of rated securities. All information contained herein is protected by copyright No warranty, express or implied, as to the accuracy, law and none of such information may be copied or timeliness, completeness, merchantability or fitness for any otherwise reproduced, repackaged, further transmitted, particular purpose of any such rating or other opinion or transferred, disseminated, redistributed or resold, or stored information is given or made by AMB in any form or manner for subsequent use for any such purpose, in whole or in part, whatsoever. in any form or manner or by any means whatsoever, by any Each credit rating or other opinion must be weighed solely as person without AMB’s prior written consent. one factor in any investment or purchasing decision made by or on All information contained herein is obtained by AMB from behalf of any user of the information contained herein, and each sources believed by it to be accurate and reliable. Because of the such user must accordingly make its own study and evaluation of possibility of human or mechanical error as well as other factors, each security or other financial obligation and of each issuer and however, all information contained herein is provided “AS IS” guarantor of, and each provider of credit support for, each security without warranty of any kind. Under no circumstances shall AMB or other financial obligation that it may consider purchasing, have any liability to any person or entity for: holding or selling.

(a) any loss or damage in whole or in part caused by, resulting Australia from, or relating to, any error (negligent or otherwise) or A.M. Best Asia-Pacific Limited (AMBAP), Australian Registered other circumstance or contingency within or outside the Body Number (ARBN No.150375287), is a limited liability company control of AMB or any of its directors, officers, employees incorporated and domiciled in Hong Kong. AMBAP is a wholesale or agents in connection with the procurement, collection, Australian Financial Services (AFS) Licence holder (AFS No. 411055) compilation, analysis, interpretation, communication, under the Corporations Act 2001. Credit ratings emanating from publication or delivery of any such information, or AMBAP are not intended for and must not be distributed to any (b) any direct, indirect, special, consequential, compensatory person in Australia other than a wholesale client as defined in or incidental damages whatsoever (including without Chapter 7 of the Corporations Act. AMBAP does not authorize its limitation, lost profits), even if AMB is advised in advance of Credit Ratings to be disseminated by a third-party in a manner that the possibility of such damages, resulting from the use of or could reasonably be regarded as being intended to influence a inability to use, any such information. retail client in making a decision in relation to a particular product or class of financial product. AMBAP Credit Ratings are intended The credit ratings, financial reporting analysis, projections, for wholesale clients only, as defined. and other observations, if any, constituting part of the information Credit Ratings determined and disseminated by AMBAP are contained herein are, and must be construed solely as, statements the opinion of AMBAP only and not any specific credit analyst. of opinion and not statements of fact or recommendations AMBAP Credit Ratings are statements of opinion and not to purchase, sell or hold any securities, insurance policies, statements of fact. They are not recommendations to buy, hold or contracts or any other financial obligations, nor does it address sell any securities or any other form of financial product, including the suitability of any particular financial obligation for a specific insurance policies and are not a recommendation to be used to purpose or purchaser. Credit risk is the risk that an entity may not make investment /purchasing decisions. meet its contractual, financial obligations as they come due. Credit

REINSURANCE DIRECTORY OF ASIA 2020 23 Top 50 World’s Largest Reinsurance Groups Ranked by Unaffiliated Gross Premium Written in 2018

Reinsurance Premiums Written Total Share- 1 (US$ million ) holders' Life & Non-Life Non-Life only Funds2 Ratios3 (%) Ranking Company Gross Net Gross Net (US$ million) Loss Expense Combined 1 Swiss Re Ltd. 36,406 34,042 20,864 20,220 28,727 74.2 32.4 106.6 Munich Reinsurance 2 35,814 34,515 23,395 22,570 30,336 65.2 34.2 99.4 Company 3 Hannover Rück SE4 21,952 19,791 13,709 12,368 10,923 66.9 29.5 96.4 4 SCOR S.E. 17,466 15,773 7,069 6,115 6,672 66.5 32.8 99.3 5 Berkshire Hathaway Inc. 15,376 15,376 9,930 9,930 352,500 88.6 21.9 110.4

6 Lloyd's5, 6 14,064 9,926 14,064 9,926 34,846 72.2 33.8 106.0 China Reinsurance (Group) 7 11,564 10,681 3,942 3,809 12,689 58.0 40.9 98.8 Corporation Reinsurance Group of 8 11,341 10,544 N/A N/A 8,451 N/A N/A N/A America Inc. 9 Great West Lifeco 7,737 7,647 N/A N/A 20,096 N/A N/A N/A Korean Reinsurance 10 6,803 4,786 5,972 4,058 2,014 83.7 17.8 101.5 Company

General Insurance 11 6,582 5,684 6,503 5,611 7,932 88.4 16.9 105.3 Corporation of India7 12 PartnerRe Ltd. 6,300 5,803 5,065 4,592 6,517 73.7 28.1 101.8 13 Everest Re Group Ltd. 6,225 5,706 6,225 5,706 7,904 86.6 26.3 113.0 14 XL Bermuda Ltd. 5,219 4,135 5,002 4,124 9,698 80.6 32.2 112.8 15 Transatlantic Holdings, Inc 4,451 3,969 4,451 3,969 4,724 72.8 32.6 105.4

MS&AD Insurance Group 16 3,657 N/A 3,657 N/A 25,058 N/A N/A N/A Holdings, Inc.7, 8 RenaissanceRe Holdings 17 3,310 2,132 3,310 2,132 5,045 56.7 30.9 87.6 Ltd. 18 R+V Versicherung AG9 3,231 3,164 3,201 3,146 2,461 73.8 25.3 99.1 MAPFRE RE, Compania de 19 3,215 2,654 2,602 2,045 1,910 71.6 26.7 98.3 Reaseguros S.A.10 AXIS Capital Holdings 20 3,112 2,334 3,112 2,334 5,030 69.8 28.6 98.4 Limited

21 Arch Capital Group Ltd.11 2,648 1,977 2,648 1,977 10,231 70.0 27.6 97.6 The Toa Reinsurance 22 2,557 2,205 2,557 2,205 1,623 82.9 26.6 109.5 Company, Limited7, 8 23 Assicurazioni Generali SpA 2,199 2,199 935 935 28,210 65.2 26.1 91.3 Sompo International 24 1,996 1,573 1,996 1,573 6,967 64.9 32.2 97.1 Holdings, Ltd. 25 Pacific LifeCorp 1,981 1,981 N/A N/A 13,072 N/A N/A N/A

Qatar Reinsurance 26 1,842 971 1,842 971 2,190 68.2 35.7 104.0 Company, Limited 27 IRB - Brasil Resseguros S.A. 1,795 1,313 1,396 928 1,031 45.3 30.6 76.0 Taiping Reinsurance Co. 28 1,731 1,049 1,126 960 1,032 59.4 39.2 98.7 Ltd8 29 Odyssey Re Holdings Corp. 1,702 1,595 1,702 1,595 4,016 57.6 32.4 89.9 30 Tokio Millennium Re AG 1,626 1,179 1,626 1,179 1,257 58.6 36.4 95.0

24 REINSURANCE DIRECTORY OF ASIA 2020 Top 50 World’s Largest Reinsurance Groups (continued) Ranked by Unaffiliated Gross Premium Written in 2018

Reinsurance Premiums Written Total Share- 1 (US$ million ) holders' Life & Non-Life Non-Life only Funds2 Ratios3 (%) Ranking Company Gross Net Gross Net (US$ million) Loss Expense Combined 31 Caisse Centrale de Reassurance 1,569 1,437 1,399 1,271 2,817 86.6 10.5 97.2 Aspen Insurance Holdings 32 1,496 1,183 1,496 1,183 2,656 73.8 30.2 104.0 Limited 33 Validus Reinsurance, Ltd. 1,432 951 1,432 951 3,259 81.9 36.8 118.7 34 Peak Reinsurance Company Ltd 1,382 991 1,313 924 965 72.3 30.6 102.8 Sirius International Insurance 35 1,367 1,037 1,367 1,037 1,938 71.9 27.4 99.3 Group, Limited

Deutsche Rueckversicherung 36 1,269 834 1,186 797 321 65.3 31.7 97.0 AG 37 QBE Insurance Group Limited 1,058 920 1,058 920 8,400 62.2 27.6 89.8 38 Markel Corporation 1,051 882 1,051 882 9,100 78.9 33.8 112.7 American Agricultural 39 992 321 992 321 580 82.2 21.2 103.4 Insurance Company12 40 Qianhai Reinsurance Co., Ltd. 967 537 315 216 410 65.2 37.7 102.9

41 Hiscox Ltd 812 241 812 241 2,317 84.7 29.4 114.1 African Reinsurance 42 797 681 745 631 917 61.7 36.2 97.9 Corporation 43 Chubb Limited 722 671 722 671 50,312 71.5 30.3 101.8 Allied World Assurance 44 713 649 713 649 2,817 66.8 27.3 94.1 Company Holdings, AG 45 Nacional de Reaseguros, S.A. 650 516 546 413 395 62.4 30.5 92.9

46 Third Point Reinsurance Ltd 578 558 578 558 1,205 70.6 36.2 106.8 Argo Group International 47 572 160 572 160 1,747 66.5 16.8 83.2 Holdings, Ltd 48 Greenlight Capital Re, Ltd. 568 465 568 465 478 71.6 33.6 105.1 49 ACR Capital Holdings Pte, Ltd. 548 479 548 479 784 74.4 38.5 112.9 50 W.R. Berkley Corporation 545 480 545 480 5,480 68.7 37.7 106.4

1 All non-USD currencies converted to USD using foreign 7 Fiscal year-end March 31, 2019. exchange rate at company's fiscal year-end. 8 Net asset value used for total shareholders' funds 2 As reported on balance sheet, unless otherwise noted. 9 Ratios are as reported and calculated on a gross basis. 3 Non-Life only. 10 Premium data excludes intergroup reinsurance. 4 Net premium written data not reported; net premium 11 Based on Arch Capital Group Ltd. consolidated financial earned substituted. statements and includes Watford Re segment. 5 Lloyd's premiums are reinsurance only. Premiums for 12 Data and ratios based on US Statutory Filing. certain groups in the rankings may include Lloyd’s N/A Information not applicable or not available at time of Syndicate premiums when applicable. publication. 6 Total shareholders' funds includes Lloyd's members' Source: AM Best data and research assets and Lloyd's central reserves.

REINSURANCE DIRECTORY OF ASIA 2020 25 Australia 29 Stable Stable Stable Stable Stable Stable Stable Outlook/ Implication Developing A A– A– A– A– FSR A++ A++ B++ u Stable Stable Stable Stable Stable Stable Stable Outlook/ Implication Developing . a a– a– a– a– ICR aa+ aa+ bbb u bbb (ARPA) and the(ARPA) Australian Securities and Investment Commission (ASIC) regulate the insurance industry in Australia. also serves ARPA as the regulator of the entire financial services industry standards. international to conforms and accommodative. Australia has so far cut its policy interest bringing rate twice the in measure 2019, Theto 1%. initial cut was the first sinceAugust of 2016. referred to Australia’s robust regulatory framework and the policy actions that have lowered risks to the financial sector as sector positives. The asset quality of the banking system remains high, despite a more recent profitability decline, with 1%. non-performing at loans minister in just over five years.Policy-making in Australia is transparent, and the return of the Liberal-National policy indicates government continuity. transparent, with minimal corruption. The stable regulatory environment, combined with a resilient economy, makes Australia an attractive location for foreign direct investment. has proposed tax cuts for lower- to middle-income Proposed businesses. small and households legislation to lower the corporatetax rate for large corporations from 30% has to 25% been deferred under the current government, leaving the rate higher than the OECD average. has only a small majority. Following party divisions Scottin Morrison 2018, became the fifth prime The Australian Prudential Regulation Authority Monetary policy is expected to remain FinancialThe Sector 2018 IMF’s Assessment Australia’s legal system isstrong, stable, and In response to growth concerns, the government • • • • • Financial System Risk: Very Low www.ambest.com ustralia country is a CRT-1 with a low level of economic risk and very low levels of political The government is expected to support growth of the government elections in the 2019 but still remains below the central bank’s target of 2%. Wage growth remains subdued. score in the Index of Economic Freedom, indicating indicating Freedom, Economic of Index the in score a dynamic, open, and free market with robust competition. under way following years of price increases. The decline in home values has weighed on consumer mortgage of ratio The spending. and sentiment and high is income disposable household to debt remains a risk. growth prospects.growth Exports underperformed, have and Australia’s rural goods exports have been conditions. economy is well diversified; however, the global global the however, diversified; well is economy and Asia, in tensions trade slowdown, economic construction activity) have weighed on Australia’s The Liberal-National maintained coalition control Unemployment remains around 5%. Inflation Australia has the fifth-highest economic freedom negatively impacted by adverse climate A correction to the housing market remains internal issues (such as the decline in home With services driving over 60% of GDP Australia’s Pacific International Insurance Pty Insurance International Pacific Limited Guild Insurance Limited Guild Insurance The Hollard Insurance Company Pty Ltd The New India Assurance Company Limited (Australia Branch) General Reinsurance Australia Ltd Australia Reinsurance General General Reinsurance Life Australia Ltd. Rated Companies Rated Limited Ansvar Insurance Limited First American Title Insurance Company of Australia Pty

summarize AM Best’s opinion on any particular insurance market, or the prospects for that market. All credit ratings are effective For 31 Augustcurrent as of 2019. ratings please visit Notes: This Country Risk Report is effective as of This22 August report 2019. is designed to provide a brief, high level, explanation of some of the key factors that determine a country’s Country Risk Tier assignment. It is not intended to REINSURANCE DIRECTORY OF ASIA 2020 ASIA OF DIRECTORY REINSURANCE Political Risk: Very Low • • • •

along fiscal with stimulus. Risk: Low Economic • as export growth weakens due to trade tensions to response in ebbs consumption household and declining home ownership-linked wealth. through continued public infrastructure investment, and financial system Australia’s risk. 2018, In GDP continued is Growth setto grow. to slow in 2019 Australia – CountryRisk Australia Tier A Cambodia 37 Corruption Perception Index. Perception Corruption Department Industry Financial of the regulates industry. insurance and focused on attracting investment. The government has stated that the new Revenue Mobilization Strategy will place greater emphasis on tax reform. substantially over the last decade, raising the risk non- Although sector vulnerability. financial of performing loans are officially estimated at only 2.4%, the IMF has noted that the true level of NPLs understated. be may suppression of the opposition continues and makes challenges to the unlikely. CPP Prime Minister Hun Sen leads the country. rights records have led the to consider EU suspending its Everything But Arms (EBA) trade scheme with the country. Under the EBA, Cambodia receives duty-free access markets; to EU suspension of the EBA would have a significant, negative impact on the country’s textile industry. The is expected EU to decide on whether the EBA should be continued by the end Forty of 2020. percent of Cambodia’s exports go to the EU. weak. Despite reform pledges, vulnerabilities persist and further anti-corruption efforts are critical to the country’s long-term success. Cambodia out countries of 180 is ranked in the 161 Party won almost all seats election. in the July 2018 government criticism, Despite international The Insurance and Pension Division of the The tax regime is generally friendly to businesses credit-to-GDPCambodia’s increased has ratio Concerns about Cambodia’s human and labor Corruption is rampant, while the rule of law is

Financial System Risk: High Very System Financial • • • • •

ambodia, country, a CRT-5 has high levels of economic and political risk and a very high level With lower oil prices and stable food prices, opposition the Cambodian party People’s in 2017, Development Index, with all of its quality of health qualityand standard of living indicators of among the bottom third of performers. public education system has resulted in a shortage of skilled labor. Other pressing challenges include healthcare sanitation. and Cambodia ranks 156 countriesout 189 according to the UN’s Human infrastructure development and employment. The The employment. and development infrastructure government is targeting a budget deficit of 3.3% in up from 2.2% recorded2019, but below in 2018 the target of 4.8%.2018 driven by a robust global economy, sustained FDI inflows, and high levels of government spending in sector. construction the widened, with the government focusing on of Cambodia’s exports, the sector is under pressure due to higher wages in Cambodia, compared to Laos. and Bangladesh like countries Following the forced dissolution of its main Cambodia has a youngworkforce, but weak a Cambodia’s government budget deficit has The country has grown consistently and strongly, Although textiles account for approximately 70% Political Risk:Political High • • • • short term. Risk:Economic High • headwinds. is Growth projected in 2019 to be 6.9%, construction and tourism growing by buoyed activity. inflation is forecast to remain under 3.0% over the C of financial system risk. The economy is expected to continue its strong growth, despite external Cambodia –Cambodia Country Risk Tier REINSURANCE DIRECTORY OF ASIA 2020 ASIA OF DIRECTORY REINSURANCE explanation of some of the key factors that determine a country’s Country Risk Tier assignment. It is not intended to summarize AM Best’s opinion on any particular insurance market, or the prospects for that market. Notes: This Country Risk Report is effective as of 22 AugustThis report 2019. is designed to provide a brief, high level, China 41 Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Outlook/ Developing Implication A A A A A A A A A– A– A– A– FSR A++ B++ u Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Outlook/ Implication Developing . a a a a a a a a– a– a– a– a+ ICR aa+ bbb u bbb Social unrest is due mostly to labor disputes, land The Chinese Insurance Regulatory Commission strong external a maintains China financial position. Credit growth has been a primary driver of China’s Under PresidentXi Jinping, who is also general The judicial system ishighly politicized, and of been one has corruption curbing Although centralized. strong the Given corruption. and pollution, acquisition, impact the dissent, for intolerance and control central of protests on government stability is very low. industry. insurance the regulates (CIRC) It holds ample foreign exchange reserves and the current account is at a consistent surplus. rapid economic expansion. The IMF has warned of dependence debt country’s the reduce need to the sector financial strengthening continue to and regulation. control increase the difficulty of operations for business. foreign secretary of the Chinese Communist Party, China power. of consolidation growing a experienced has The lifting of the presidential term limit in 2018 medium-termsignals stability. government intellectual property theft remains a risk for efficient, is enforcement contract China’s businesses. ranking sixth globally by the World Bank. transparency priorities, top Jinping’s Xi President is still inadequate, especially at local levels. Through the anti-corruption mandate of the National Supervisory Commission, the overview of businesses and local government is expected to be economy, to which foreign companies can be vulnerable. Cyber security and significant state

• Risk: Moderate System Financial • • • Political Risk: ModeratePolitical • • • www.ambest.com hina, country, a CRT-3 has a low level of economic risk and moderate levels of political and financial China, the world’s most populous country, is The government plays a dominating role in the The US is China’s top export market and placed tariffs Although the one-child policy is no longer in effect, China has set a goal of ending extreme poverty Currently the second-largest economy in the world, world, the in economy second-largest the Currently similarly placed tariffs on US goods it imports. China’s tax cuts may be able to offset the impact of the tariffs, but the tensions have had negative implications for growth. economic global on USD 250 billion worth of Chinese goods in 2018, followed by an increase in these tariffs for USD 200 billion Additional of goods in tariffs 2019. on USD 300 billion of imports are planned for September. China decline, however, rising income inequality poses a challenge. the to headwind long-term a remain demographics prospects. economic country’s in the country meet To this by 2020. goal, China will need to lift approximately million 10 people out of poverty this As year. poverty continues to China is still classified as a developingcountry. Per capita income ranks relatively at an low, estimated USD 9608. Qianhai Reinsurance Co., Ltd. Co., Reinsurance Qianhai Limited Company, PropertyStarr (China) Casualty & Insurance Ltd. Company (China) Reinsurance Taiping LIG Insurance (China) Ltd Co Limited (China) Company Insurance Lloyd’s Ping An Health Insurance Company of China, Ltd. China Reinsurance (Group) Corporation (Group) Reinsurance China SHIPPINGCOSCO Captive Insurance Co., Ltd. Branch) (Shanghai General AG Reinsurance Ltd. Co., (China) Hyundai Insurance China Continent Property & Casualty Insurance Company Ltd Ltd. Company Reinsurance Life China PropertyChina Ltd. Casualty Company & Reinsurance Aioi Nissay Dowa Insurance (China) Company Limited Company (China) Dowa Insurance Nissay Aioi Rated Companies Rated

Notes: This Country Risk Report is effective as of This22 August report 2019. is designed to provide a brief, high level, explanation of some of the key factors that determine a country’s Country Risk Tier assignment. It is not intended to summarize AM Best’s opinion on any particular insurance market, or the prospects for that market. All credit ratings are effective For 31 Augustcurrent as of 2019. ratings please visit REINSURANCE DIRECTORY OF ASIA 2020 ASIA OF DIRECTORY REINSURANCE • • • • Economic Risk: Low Economic • lowered reserve requirements. by economy second-largest world’s the to home according to theGDP, IMF. on the country’s economic outlook, as has a wider structural slowdown in the country. In response to the slowdown, the central government has adopted a number of stimulus measures, such as tax cuts and system risk. China set its growth target torange a the slowestof 6% to 6.5% expected in 2019, pace in decades. tensions Trade with the US have weighed China – Country Risk Tier Risk – Country China C Hong Kong 51 Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Negative Negative Outlook/ Implication A A A A A A A– A– A– A– A– A– A– A– A– B+ FSR Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Negative Negative Outlook/ Implication . a a a a a a a- a– a– a– a– a– a– a– a– ICR bbb– Hong Kong’s tax regime is highly competitive, Hong Kong is a net creditor, with ample foreign Hong Kong is seeking to implement Basel III Chief Executive Carrie Lam was voted into office The legalsystem in Hong Kong is highly efficient. for Authority Insurance Independent The As SAR, a HongKong operates underthe “One Hong Kong is the SAR’s regulatory body for the industry. insurance with low tax rates and no tariffs, while providing incentives. various exchange reserves and strong FDI inflows. The current account also enjoys a comfortable surplus. requirements, which the IMF has cited as an financial “robust Kong’s Hong of indicator regulation and supervision”. The SAR is also developing a risk-based capital regime for insurance companies, expected in 2021. Country, Two Systems”Country, model. Two Its autonomy Beijing with somewhat diminished recently, has control. tightening increasingly by the pro-Beijing contingent of the Legislative Calls for Lam’s resignationCouncil in 2017. surged following her support of a controversial extradition which law, was seen as ceding Council Legislative mainland. the to autonomy elections are scheduled for early 2020. individual and effective, is enforcement Contract and property rights are wellupheld. In the Ease of Doing Business Index, Hong Kong is ranked the 4th in the world. Corruption is rare, with Hong worldwide. countries 20 top the in ranking Kong

• • • • • Financial System Risk: Very Low • Political Risk: Low • www.ambest.com ong region Kong is a CRT-2 with lowlevels of economic and political risk, and very low levels of In 2019 Hong Kong sawIn record 2019 protests in response Unemployment has been at under low, 3%. The tight The population is affluent and well educated but Hong Kong’s openness has resulted in a trade-focused A favorable business environment, low tax burden, Hong Kong is considered the world’s freest economy economy freest world’s the considered is Kong Hong aging rapidly. Hong Kong’s birth rate is below the population eventual suggesting level, replacement numbers immigration increase. unless decline increase of global uncertainty and the rise of local unrest surrounding proposed a extradition bill. labor market has spurred wage growth. China and the US. The trade tensions between those two countries has weighed on Hong Kong’s growth prospects, as has the wider economic slowdown in China. Consumer spending has moderated with the Hong Kong’s deep integration in the global economy economy global the in integration deep Kong’s Hong may increase the country’s vulnerability to external shocks. trading partners Its main mainland are economy. ranking that it has held for a quarter century. open and intervention, government minimal economy attract robust foreign investments, but according to the Index of Economic Freedom, a Rated Companies Rated Taiping Reinsurance Company Limited Company Reinsurance Taiping Limited Company Insurance Tugu The People’s Insurance Company of China (Hong Kong), Limited Limited (Asia) Insurance International Starr Kai Properties Hung Sun Limited Insurance Dah Sing Insurance Company (1976) LimitedDah Sing Insurance Company (1976) Limited (Asia) Insurance Leong Hong The New India Assurance Company Limited (Hong Kong Branch) Limited Company Reinsurance Peak China BOCOM Insurance Company Limited Company Insurance BOCOM China Limited Company Merchants Insurance China Limited (HK) Company Insurance Taiping China Limited Company Insurance Wing Lung CMB AIG Insurance Hong Kong Limited Kong Hong Insurance AIG Asia Capital Reinsurance Group Pte. Ltd. (Hong Kong Branch) Blue Cross (Asia-Pacific) Insurance Limited

explanation of some of the key factors that determine a country’s Country Risk Tier assignment. It is not intended to summarize AM Best’s opinion on any particular insurance market, or the prospects for that market. All credit ratingseffective are For 31 Augustcurrent as of 2019. ratings please visit Notes: This Country Risk Report is effective as of 22 AugustThis report 2019. is designed to provide a brief, high level, REINSURANCE DIRECTORY OF ASIA 2020 ASIA OF DIRECTORY REINSURANCE • • • • law that were perceived as a loss of autonomy to China. mainland Risk: Low Economic • to slow to 1.9% in 2019. Inflation is to slow inexpected2019. to 1.9% to remain moderate, between 2% and 2.5%. extradition Kong’s Hong to amendments proposed to financial system risk. As a Special Administrative Region is economy territory’s autonomous the China, of (SAR) closely tied to that of the mainland.Growth is projected Hong Kong – Country Risk Tier Risk – Country Kong Hong H India – Country Risk Tier

ndia, a CRT-4 country, has moderate levels of the lower house. Prime Minister Narendra Modi Ieconomic and financial system risk and a high level was re-elected to serve a second term until 2022. of political risk. Although its economy has benefited However, Modi’s coalition does not have a majority from a well-diversified economic base and rapid in the upper house, meaning that the pattern of expansion in multiple sectors, growth is expected political gridlock in the upper house is expected to to moderate in 2019 owing to global trade tensions continue during Modi’s second term. and internal headwinds. Uncertainty in the lead up • The government has a pro-business agenda and to the 2019 general elections weighed upon business seeks to stimulate growth through initiatives confidence; however, the re-election of Prime targeting agrarian distress and infrastructure Minister Modi signals policy continuity. development. Inflation has been relatively low, around 3%, and • Industrial action is frequent in sectors in which is expected to stay within the central bank target of labor unions are strong, such as transportation. 2%-6%. Bribery is common and anti-corruption reforms have had a mixed impact. Economic Risk: Moderate • Tensions with Pakistan over Kashmir remain • According to IMF projections, India will again be elevated, following military action at the the world’s fastest-growing large economy this beginning of 2019. Although India did respond year, with a growth rate around 7%, despite a with an airforce strike in Pakistan, further general softening in the global economy. Sector- escalation of the conflict is expected to remain wise services—which includes IT—is the primary contained to targets in Kashmir. driver of India’s GDP growth. Agriculture accounts • Protests are frequent, but largely non-violent. for only 15% of the economy, but employs nearly Demonstrations are usually sparked by concerns half the population. about youth unemployment and agrarian-related • Private consumption accounts for an estimated issues such as perceived land and environmental 60% of GDP. The country has favorable law violations. demographic trends, but struggles with the creation of enough jobs for its educated youth. Financial System Risk: Moderate Nearly half of India’s 1.3 billion population is under • The insurance industry is regulated by the the age of 25. Insurance Regulatory and Development Authority • To support job creation, India needs greater (IRDA). integration into international markets. Export • India has the highest non-performing loan ratio – expansion remains key to continued economic 10.3% – of the top ten world economies, according gains. to the IMF. • The government has implemented reforms to • The goods and services tax (GST) implemented liberalize foreign direct investment flows, as in 2017 was intended to boost intra-India trade private investment has remained relatively low. by simplifying an assortment of indirect taxes across the various Indian states. As a result of the Political Risk: High GST, India has registered over half a million new • The 2019 elections cemented the continuing taxpayers. majority of the ruling Bharatiya Janata Party in

Outlook/ Outlook/ Rated Companies ICR FSR

Implication Implication India General Insurance Corporation of India a– Stable A– Stable National Insurance Company Limited ccc Negative C Negative The New India Assurance Company Limited a– Stable A– Stable The Oriental Insurance Company Limited bbb– Negative B+ Negative United India Insurance Company Limited b+ Negative C++ Stable

Notes: This Country Risk Report is effective as of 22 August 2019. This report is designed to provide a brief, high level, explanation of some of the key factors that determine a country’s Country Risk Tier assignment. It is not intended to summarize AM Best’s opinion on any particular insurance market, or the prospects for that market. All credit ratings are effective as of 31 August 2019. For current ratings please visitwww.ambest.com .

REINSURANCE DIRECTORY OF ASIA 2020 61 Indonesia – Country Risk Tier

ndonesia, a CRT-4 country, has moderate levels Political Risk: High Iof economic and financial system risk and a high • President Widodo was elected to a second term level of political risk. Growth is expected at 4.9% in in April of 2019. His coalition has a parliamentary 2019. Although growth has been robust over the past majority and he is expected to continue pursuing five years, hovering around 5.2%, it fell short of the the policies of his first term, including resource 7% annual growth rate targeted by President Joko nationalism and projects designed to improve the Widodo during his first term. country’s business-operating environment. Actions to stabilize Indonesia’s currency, which • During President Widodo’s first term, Indonesia experienced volatility during 2018 due to geopolitical improved its World Bank Ease of Doing Business tensions, are expected to weigh on the growth ranking, from 106 in 2015 to 73 in 2018. Indonesia’s outlook. best scores are in the categories of getting electricity and resolving insolvency. Economic Risk: Moderate • Contract enforcement is inefficient, as is the • As the fourth most populous nation in the world, enforcement of property rights, and corruption Indonesia’s large and young labor force supports in the legal system is relatively widespread. The its status as the largest economy in Southeast Asia. Corruption Perception Index ranks Indonesia 89 • Along with global geopolitical tensions and the out of 190 countries. resulting flight from emerging markets, Indonesia’s • Indonesia has increased its counterterrorism current account deficit spurred depreciation of efforts following terror attacks in 2018, but the the rupiah in 2018. In response, the government possibility of low-capability attacks remains. paused infrastructure projects that require significant imports of capital goods. Financial System Risk: Moderate • Indonesia is a member of the WTO, ASEAN, and • The Financial Services Authority of Indonesia (OJK) the G-20 and has relatively few trade barriers. regulates the insurance industry and is responsible Indonesia’s primary trade partner is China; China’s for supervising the entire financial services sector. recent slowdown is likely to weigh on Indonesia’s • The Basel III framework has been implemented in exports. the financial sector, leading to an improvement in • Government deficits and the debt-to-GDP ratio financial sector supervision. Banks dominate the currently are expected to remain stable and sector, with ample system-wide liquidity according manageable in the coming years, reflecting the to the IMF. government’s fiscal reform efforts. The IMF has • Inflation is expected to be around 3%, within recommended that Indonesia create additional the central bank’s target range of 3.5%±1%. fiscal space through tax reform. To increase Bank Indonesia is expected to start reversing the Indonesia’s competitiveness, President Widodo has monetary policy tightening that occurred in 2018, pledged to reduce Indonesia’s corporate tax rate, now that the currency has stabilized and the global currently at 25%. monetary policy trend has turned accommodative.

Outlook/ Outlook/ Rated Companies ICR FSR Implication Implication PT Asuransi Jasa Indonesia (Persero) bbb+ Negative B++ Stable PT Asuransi Samsung Tugu a– Stable A– Stable PT Asuransi Tokio Marine Indonesia a– Stable A– Stable PT Asuransi Tugu Pratama Indonesia, Tbk a– Negative A– Negative

REINSURANCE DIRECTORY OF ASIA 2020 77 Japan – Country Risk Tier Japan s a CRT-2 country, Japan has very low levels of structural issues remain. Aeconomic risk, and low levels of political and • Although Prime Minister Abe’s Liberal Democratic financial system risk. Growth is projected to remain Party (LDP) has a majority in the legislature, it under 1% over the medium term. Issues hindering failed to win a super majority in the July 2019 growth are mostly chronic and structural, including elections. Abe had indicated his intention to an aging population and a high level of government amend Japan’s pacifist Constitution if the LDP had debt. Consumer spending is expected to decline won a two-thirds majority. later this year, as the government implements a • Business operations are costly due to heavy planned consumer tax. government regulation. The business environment Inflation remains low but is expected to remain is somewhat closed; cooperation between the positive over the short term. government and some industries makes it difficult for start-up companies to enter the market. Economic Risk: Very Low • The judiciary in Japan is highly independent and • The Japanese economy is dominated by the advanced. Law enforcement is consistent, but automotive industry, industrial machinery, and judicial processes can be inefficient and certain construction sectors, regulations lack transparency. • Its geographic location makes Japan vulnerable • Regional tensions with Japan’s neighbors – China, to earthquakes and tsunami. Given the scarcity Russia, and North Korea – persist, but direct of critical natural resources, the country was military confrontation is unlikely. significantly impacted by the 2011 meltdown at the Fukushima Nuclear Power Plant. Fallout from Financial System Risk: Low the disaster affected Japan’s energy self-sufficiency • The Financial Services Agency (FSA) regulates the rate, which has been under 10%. banking and insurance industries. • Unemployment remains at record lows, close • Japan’s tax system is transparent and well to 2.3%. Japan’s population is aging rapidly, developed. Under Prime Minister Abe, corporate constraining the size of its workforce, although tax rates have been lowered, to enhance the increased participation among women and older country’s competitiveness. An increase in the workers is temporarily mitigating some of the consumption tax from 8% to 10% is planned in fall effects of this demographic shift. The country has 2019. one of the lowest percentages of foreign workers • The financial system is stable, but profitability among OECD countries, which further constrains is low. As a result of the aging population, the its labor pool. banks’ role in the economy is likely to decrease in importance due to weakening credit demand. Political Risk: Low • Growth has been persistently weak and the • The Japanese government is democratic and country faces stagnation. Despite the central relatively stable. Serving his third term, Prime bank’s negative interest rates, inflation remains Minister Shinzo Abe has orchestrated an economic below target. recovery for the country, although long-term Outlook/ Outlook/ Rated Companies ICR FSR Implication Implication Aflac Life Insurance Japan Ltd aa– Stable A+ Stable Aioi Nissay Dowa Insurance Company Limited aa Stable A+ Stable Assicurazioni Generali S.p.A. (Japan Branch) a+ Stable A Stable The Dai-ichi Life Insurance Company, Limited aa– Stable A+ Stable Hyundai Marine and Fire Insurance Co., Ltd. (Japan Branch) a Stable A Stable Meiji Yasuda Life Insurance Company aa– Stable A+ Stable Mitsui Sumitomo Insurance Company, Limited aa Stable A+ Stable The New India Assurance Company Limited (Japan Branch) a– Stable A– Stable Nippon Life Insurance Company aa– Stable A+ Stable Sompo Japan Nipponkoa Insurance Inc. aa– Stable A+ Stable Starr Indemnity & Liability Company (Japan Branch) a Stable A Stable The Toa Reinsurance Company, Limited a+ Stable A Stable Tokio Marine & Nichido Fire Insurance Co., Ltd. aa+ Stable A++ Stable

REINSURANCE DIRECTORY OF ASIA 2020 89 South Korea – Country Risk Tier

outh Korea, a CRT-2 country, has a very low level Democratic Party lacks a majority in the National Sof economic risk and low levels of political and Assembly. His popularity over the next few years financial system risk. Its economy and financial may be undermined by the persistently high youth markets are well integrated with the global economy, unemployment rate and his non-action regarding and it is a large exporter. The 2018 peace agreement the chaebol conglomerates that exert significant with North Korea has significantly mitigated external control over the domestic economy. security risk. • South Korea has a well-established legal system and GDP grew 2.7% in 2018. Growth is expected to strong contract enforcement. Foreign investment is

decline to 1.7% in 2019, due largely to a slowdown in generally welcomed and well protected. Korea South global trade. Inflation is expected to increase slightly, • Relations with North Korea have been improving towards 2%, owing to healthy domestic spending as due to a series of summits over the past year and well as higher global oil prices. the signing of the Panmunjom Declaration. A permanent liaison office between the two countries Economic Risk: Very Low was established in September 2018. Efforts to • South Korea has a free market that is heavily denuclearize the peninsula are expected to export-oriented, which increases the economy’s continue. vulnerability to global shifts in demand and changes Financial System Risk: Low in trade. However, Korea exports to a diverse set of • The insurance sector is regulated by the Financial countries, mitigating this vulnerability. Services Commission and the Financial Supervisory • South Korea’s labor market is somewhat flexible, Service. enabling its firms to meet the changing demands of • The tax system is well established and broadly its global customers. Overall unemployment is low attractive for foreign investment, as the government at 4%, but youth unemployment is high. attempts to decrease foreign investment’s effective • Over the past few years, South Korea’s currency, tax rates. the won, has strengthened as a result of increased • The country benefits from a large current-account demand for Korean products. Low interest rates surplus and its consistent status as a net creditor. have partially countered the won’s strengthening The current account surplus is expected to narrow and are expected to remain in the 2% range. slightly. • Business operations in South Korea benefit from its • South Korea’s maintains a sound financial system, advanced infrastructure, especially in key sectors according to the IMF. However, the IMF recommends such as communications and transport. The World modifying current fiscal policy to improve long-term Bank’s 2019 Ease of Doing Business survey ranks prospects. In particular, a continued expansionary South Korea 5th in the world out of 190 countries. fiscal policy, efforts to promote women and youth in Political Risk: Low the workforce, and introducing tax reforms should • President Moon Jae-In promotes liberal policies be priorities. and enjoys relatively high popularity, although his

Outlook/ Outlook/ Rated Companies ICR FSR Implication Implication ACE American Insurance Company Korea (Korea Branch) aa+ Stable A++ Stable Construction Guarantee Cooperative aa– Stable A+ Stable DB Insurance Co., Ltd. a+ Stable A Stable General Reinsurance AG (Seoul Branch) aa+ Stable A++ Stable Hanwha General Insurance Company Limited a Stable A Stable Hyundai Marine & Fire Insurance Co., Ltd. a Stable A Stable KB Insurance Co., Ltd. a Stable A Stable Korea P&I Club a– Stable A– Stable Korean Reinsurance Company a Stable A Stable Meritz Fire & Marine Insurance Co., Ltd. a– Stable A– Stable NongHyup Property and Casualty Insurance Company Limited a– Stable A– Stable RGA Reinsurance Company (South Korea Branch) aa– Stable A+ Stable Samsung Fire & Marine Insurance Co., Ltd. aa+ Stable A++ Stable

REINSURANCE DIRECTORY OF ASIA 2020 97 Macau 105 Stable Stable Stable Stable Outlook/ Implication A A A A– FSR Stable Stable Stable Stable Outlook/ Implication . a a a a– ICR boosting infrastructure social spending. and institutional weaknesses, corruption money and system legal The concerns. remain laundering faces a shortage of qualified professionals and can be inefficient at times. Insurance Supervision Department of the Macau Monetary Authority (AMCM). The AMCM also banking the regulates industry. dollar, limiting its control over interest rates. However, an ample amount of foreign reserves restriction.helps this mitigate ampleexternal foreign exchange liquidity, assets, and robust FDI inflows. The IMF has encouraged internal affairs. The governmentis broadly pro- Beijing, political its with main opposition largely weakened. of Macau since 2009; his popularity has been deficiencies perceived by impacted negatively in the government’s natural disaster response efforts,along with limited success in as Seng, Iat Hot economy. diversifying Macau’s the only candidate running, is set to be elected Macau’s new chief executive in its end of August elections. investment and is committed to maintaining an tax system. and environment business attractive the diversification, economic promote To encourage to policies adopted has government sectors businesses in gaming. than other Because of the nature of the gaming sector and Macau’s insurance industry is regulated by the Macau’s currency is pegged to the Hong Kong Macau’s external position is strong, with high Fernando Chui Sai On has been Chief Executive The governmentseeks to attract foreign Macau enjoys a high level of autonomy over • Risk: Low System Financial • • • • • Political Risk: ModeratePolitical • www.ambest.com acau, a CRT-2 region,acau, a CRT-2 is a Special Administrative Region of China, (SAR) and a former Portuguese With US-China trade tensions continuing, the remains tight, with unemployment consistently below 2%. However, growing income inequality, challenges. are affordability, housing with along Partnership Arrangement (CEPA) has significantly has Partnership Arrangement (CEPA) between barriers investment and trade lowered the two entities. capita incomes in the world. The labor market spending visitors. The IMF has stated that Macau’s growth outlook is now less volatile, as non- grown. has tourism gaming outlook. which led to a sharp decline in Macau’s gaming diversification pursued has Macau revenues, dependency high- its on lessen to strategies for 55% of GDP. offor GDP. 55% a majority of Macau’s tourists are from greater China. The structural economic slowdown in China poses a headwind to the SAR’s economic Tourism, including the gaming market, accounts accounts market, gaming the including Tourism, The population enjoys one of the highest per The Macau and Mainland Closer Economic After China’s corruption crackdown in 2014, As the only legal destination for casinos in China, Macau has an open, free-market economy. China Insurance Taiping (Macau) Co., Ltd. Luen Fung Hang Insurance Company Limited Macau Insurance Company Limited Rated Companies Rated AIG Insurance Hong Kong Limited (Macau Branch) effective For 31 Augustcurrent as of 2019. ratings please visit Notes: This Country Risk Report is effective as of 22 AugustThis report 2019. is designed to provide a brief, high level, explanation of some of the key factors that determine a country’s Country Risk Tier assignment. It is not intended to summarize AM Best’s opinion on any particular insurance market, or the prospects for that market. All credit ratings are REINSURANCE DIRECTORY OF ASIA 2020 ASIA OF DIRECTORY REINSURANCE • • • • Economic Risk:Economic Moderate • at 3.9% for 2019. Some pickupat 3.9% for in inflationary 2019. pressure is expected, stemming from China’s pork crisis, but inflation is still projected to be under3% for the year. Its economy is closely tied to China’s and depends highly on the tourism and gaming sectors. on weighed has external environment uncertain Macau’s growth projects, which are now estimated colony. It has moderate levels of economic and politicalrisk and a lowlevel of financial system risk. Macau – Country Risk Tier Risk – Country Macau M Malaysia – Country Risk Tier

alaysia, a CRT-3 country, has moderate levels Political Risk: Moderate Mof economic and political risk and a low level • After elections in May of 2018, Prime Minister of financial system risk. GDP growth is expected at Mahathir Mohamad formed a coalition government. 4.7% in 2019. However, as part of the coalition formation, Prime The expected slowdown is largely attributable Minister Mohamad pledged to serve only 1-2 years to the US-China trade conflict and slowing global as prime minister, after which he would transfer growth. Malaysia’s economy is deeply tied to the position to the leader of another party in the inter-regional trade; Malaysia is a hub for the coalition. manufacturing of advanced electrical components. • Although criticizing the increasing level of Chinese Inflation was weak in 2018, at 1%, and is investment in Malaysia shortly after coming to expected to remain relatively low for 2019. office, Prime Minister Mohamad has demonstrated willingness to resume some initiatives following Economic Risk: Moderate renegotiation. • Now considered an upper-middle income country • The judiciary is efficient, capable, and relatively by the World Bank, Malaysia is targeting high- independent. Perceived high levels of corruption, income classification by 2024. Malaysia’s economy especially in the government, weakens public is well diversified, with services accounting for trust. Malaysia is ranked 61 out of 180 countries in 56% of GDP, followed by manufacturing at just Transparency International’s Corruption Perception over a fifth of GDP. Index. In January 2019, the government launched a • Malaysia’s top exports are electronics, petroleum, five year National Anti-Corruption Plan, focused on chemicals, and palm oil. Growth in exports is the public sector. likely to slow as external demand remains weak. • Malaysia significantly increased its ranking in Rather than exports, private consumption is the latest World Bank’s Ease of Doing Business expected to be the main driver of economic Index, jumping from 24th in the world to 15th. The growth. improvement was a result of six reforms the country • The May 2018 elimination of the Goods and enacted in 2018, many of which related to efficiency Services Tax gave the Malaysian consumer a gains through technological adoption. boost. Government revenues fell as a result, and public-sector investment is expected to be Financial System Risk: Low subdued. The country continues to generate a • The insurance industry in Malaysia is regulated current account surplus. by the central bank, Bank Negara Malaysia (BNM). • The openness of Malaysia’s economy is a The IMF described the BNM’s financial oversight Malaysia challenge for the county in light of global framework as robust and effective. protectionist trends. The country ranked 22nd • The IMF considers Malaysia’s financial sector to be in the world in the latest Index of Economic resilient and well positioned for potential shocks. Freedom. Liquidity and profitability are supportive and non- performing loans are low.

Outlook/ Outlook/ Rated Companies ICR FSR Implication Implication Asia Capital Reinsurance Malaysia Sdn Bhd a– Negative A– Negative Energas Insurance (L) Limited a Stable A Stable General Insurance Corporation of India (Labuan Branch) a– Stable A– Stable Labuan Reinsurance (L) Ltd a– Negative A– Negative Lonpac Insurance Bhd a Stable A Stable Malaysian Reinsurance Berhad a– Stable A– Stable Singapore Reinsurance Corporation Limited (Labuan Branch) a– Stable A– Stable Tune Protect Re Ltd bbb+ Stable B++ Stable Wentworth Insurance Company Limited (Labuan Branch) a Stable A Stable

REINSURANCE DIRECTORY OF ASIA 2020 109 New Zealand – Country Risk Tier

ew Zealand is a CRT-2 country with a low level of “wellbeing” priorities and included provisions for Neconomic risk and very low levels of political and mental health services, digital transformation, financial system risk. The country has experienced reductions in child poverty and in indigenous several years of growth driven by infrastructure population inequality, as well as greater investment and construction activity following environmental sustainability. the 2016 earthquake, along with an increase in • New Zealand has held onto its number 1 ranking exports, positive net migration, and tourism growth. in the World Bank’s 2019 Ease of Doing Business However, more recently its growth momentum Index; however, foreign direct investment has has slowed. Growth is expected to decline to 2.3% slowed. in 2019 from 3% in 2018. Inflation has been low, • New Zealand is considered the third-freest allowing for monetary and fiscal policy support. economy in the world by the Index of Economic Freedom, due to its regulatory efficiency, open Economic Risk: Low markets, transparent and independent judicial • New Zealand’s economy depends largely on system, and liberated economy. services (70% of GDP) and industry (26%) for • New Zealand is considered one of the least growth. corrupt countries in the world by Transparency • Growth has slowed as earthquake reconstruction International’s Corruption Perception Index, efforts reach completion. The IMF has described ranking second out of 180 countries in the latest the economy as losing momentum, with growing iteration. risks stemming from the cooling of the domestic housing market and negative spillover from Financial System Risk: Very Low international trade disputes. • The Reserve Bank of New Zealand is responsible for • New Zealand has proposed the adoption, starting maintaining a sound and efficient insurance sector. in fiscal 2021, of a target band for net public debt, It is independent and benefits from a flexible with a range of 15%-25% of GDP. Net public debt is exchange rate and a deep and sophisticated currently around 20%. financial system. • Wage growth remains low; unemployment • Inflation has consistently been below the Bank’s reached a 10-year low of 4.0% in 2018 and has target of 2% and is expected to remain subdued been near 4.2% in 2019. in response to flagging business sentiment and weaker oil. Political Risk: Very Low • In response to the economic slowdown and • The Labour-New Zealand First coalition has been in ongoing weak inflation pressures, the Reserve power since the 2017 elections, with Prime Minister Bank of New Zealand lowered the official cash Jacinda Ardern leading the country. The coalition rate to a record low. The Reserve Bank has also has focused on social welfare and infrastructure proposed raising its bank capital adequacy development. The next scheduled legislative requirements to enhance the resilience of the elections are planned for September 2020. banking sector to potential financial sector crises. • The 2019 government budget focused on New Zealand New

REINSURANCE DIRECTORY OF ASIA 2020 125 Outlook/ Outlook/ Rated Companies ICR FSR Implication Implication Aioi Nissay Dowa Insurance Company, Limited (New Zealand Branch) aa Stable A+ Stable American Income Life Insurance Company (New Zealand Branch) aa– Negative A+ Negative Beneficial Insurance Limited bbb Stable B++ Stable BNZ Life Insurance Limited a Stable A Stable Brightsideco Insurance Limited bb+ Stable B Stable CIGNA Life Insurance New Zealand Limited a Stable A Stable Co-operative Life Limited bbb+ Stable B++ Stable Consumer Insurance Services Limited bbb Negative B++ Negative DPL Insurance Limited bbb– Positive B+ Positive Fidelity Life Assurance Company Limited a– Stable A– Stable First American Title Insurance Company of Australia Pty Limited (New Zealand Branch) a Stable A Stable FMG Insurance Limited a Stable A Stable Foundation Life (NZ) Limited a– Stable A– Stable General Reinsurance Australia Ltd (New Zealand Branch) aa+ Stable A++ Stable General Reinsurance Life Australia Limited (New Zealand Branch) aa+ Stable A++ Stable Health Services Welfare Society Limited bbb– Stable B+ Stable The Hollard Insurance Company Pty Ltd (New Zealand Branch) a– Stable A– Stable Kiwi Insurance Limited a– Stable A– Stable Lifetime Income Limited bb– Stable B– Stable Mitsui Sumitomo Insurance Company Limited (New Zealand Branch) aa Stable A+ Stable Momentum Life Limited bbb Stable B++ Stable The New India Assurance Company Limited (New Zealand Branch) a– Stable A– Stable New Zealand Medical Professional Limited bbb– Stable B+ Stable Pacific International Insurance Pty Ltd (New Zealand Branch) bbb u Developing B++u Developing Partners Life Limited a– Stable A– Stable Pinnacle Life Limited bb+ Stable B Stable

New Zealand New Police Health Plan Limited a– Stable A– Stable Provident Insurance Corporation Limited bb+ u Negative B u Negative Quest Insurance Group Limited bb+ Stable B Stable Tokio Marine & Nichido Fire Insurance Company Limited (New Zealand Branch) aa+ Stable A++ Stable TOWER Insurance Limited a– Stable A– Stable Union Medical Benefits Society Limited a Stable A Stable Virginia Surety Company, Inc. (New Zealand Branch) a Stable A Stable Youi NZ Pty Limited bbb Stable B++ Stable

126 REINSURANCE DIRECTORY OF ASIA 2020 Pakistan – Country Risk Tier

akistan, a CRT-5 country, has a high level of Political Risk: Very High Peconomic risk and very high levels of political • Prime Minister Imran Khan faces rising social and financial system risk. With declining foreign unrest as a result of his anti-corruption agenda and reserves and a rising budget deficit, Pakistan agreed unpopular economic reforms. to an IMF loan program in 2019. • The judicial system is overburdened with As the country implements reform measures, commercial disputes that frequently take years to economic growth is expected to decline to 3.3% resolve. in 2019. Inflation has been on the rise due to • Corruption remains an issue for the country, with currency pressure. In response, the central bank has former government leaders facing scrutiny. Pakistan tightened monetary policy; further tightening is ranked 117 out of 175 countries in Transparency possible. International’s 2018 Corruption Perceptions Index. • Tensions with India intensified in the lead up to Economic Risk: High India’s 2019 election. Further outbreaks of the • Growth in Pakistan slowed as the country conflict are expected to be limited to the Kashmir adopted measures to combat its balance-of- region. payments crisis. A further decline in growth is expected, as additional austerity measures are Financial System Risk: Very High undertaken in conjunction with Pakistan’s recent • The State Bank of Pakistan, the country’s central IMF agreement. bank, is responsible for regulating the financial • Pakistan’s public debt reached 75% of GDP in sector. The insurance industry is regulated by the 2018; the fiscal deficit is projected to reach 7.2% Securities and Exchange Commission of Pakistan. of GDP for fiscal year 2019, above the targeted • This year Pakistan received a USD6 billion Extended 5.1%. Despite consolidation plans, the 2020 fiscal Fund Facility (EFF) loan from the IMF to address its year budget targets only a minor reduction in the fiscal imbalances and high levels of debt. deficit due to interest payments on past debt. • As part of its IMF agreement, Pakistan has agreed to • Growth in recent years has been driven by a market-determined exchange rate for its currency, increases in consumption; the services sector has the rupee. seen the largest increase in growth. • Pakistan has one of the lowest tax participation • In light of its austerity program, the government rates in the world, with only 1.9 million registered is expected to review its investment in the China- taxpayers. Pakistan Economic Corridor (CPEC), a multi-billion • To achieve sustainable growth, authorities must dollar project. China is now Pakistan’s largest address long-standing policy and structural creditor. weaknesses, according to the IMF. At the same • Inflation has been on the rise, driven by currency time, the IMF emphasized the need to continue depreciation and increased fuel costs. key assistance programs for the country’s most vulnerable.

Outlook/ Outlook/ Rated Companies ICR FSR Implication Implication Adamjee Insurance Company Limited bbb- Stable B+ Stable EFU General Insurance Limited bbb- Positive B+ Positive Jubilee General Insurance Company Limited bbb- Stable B+ Stable

REINSURANCE DIRECTORY OF ASIA 2020 131 Philippines – Country Risk Tier Philippines

he Philippines is a CRT-4 country with a moderate internationally on his human rights track record, Tlevel of economic risk and high levels of political a sweeping win by Duterte-aligned candidates and financial system risk. The economy expanded by in the 2019 Senate elections demonstrate strong 6.2% in 2018 and is expected to grow 6% in 2019. domestic support. Demand and supply-side pressures, including • Despite the strong domestic support for rising food prices linked to a rice shortage, drove Duterte, politics in the Philippines is not without inflation higher in 2018. Action by the central bank, turbulence, as demonstrated by the congressional along with the government’s decision to replace rice delay in passing the 2019 budget. The delay has import quotas with tariffs, has eased inflationary negatively impacted the country’s growth outlook. pressure. Inflation in 2019 is projected at 3.1%. • The enforcement of legal rights remains an issue, with the country scoring 151 out of 190 countries Economic Risk: Moderate in the World Bank’s enforcing contracts indicator. • Well diversified and under sound macroeconomic Corruption is widespread, although the country’s management, the economy of the Philippines ranking did improve in the latest Corruption has been one of the region’s top performers in Perceptions Index, rising to 99 out of 180 countries. recent years. Services, which accounts for 57.8% • The risk of terrorist attacks by Islamist militants of the economy, and industry, which accounts for remains high, following IED attacks in January 34.1%, are the fastest-growing sectors. Domestic 2019. consumption is strong, driving the expansion. Financial System Risk: High • The government has implemented a “Build, Build, • The Philippine’s insurance sector is regulated by Build” program, a USD180 billion development the Insurance Commission, which is under the plan that includes a variety of infrastructure Department of Finance. projects. Government spending and construction • In February 2019, the Philippines passed an activity related to these projects is expected to amendment to the New Central Bank Act. This drive growth in the coming year. amendment expanded the capitalization of • With increased growth, poverty has been on the Bangko Sentral ng Pilipinas (BSP), giving the bank decline to 21% in 2018 down from 27.6% in 2015. more maneuverability. The amendment also • The country has a high corporate tax rate of 30%. extended the bank’s supervisory powers and The government has initiated a comprehensive tax granted it the ability to impose a form of sanctions reform package that would lower the rate to 21%. and to issue debt. The IMF has viewed these The World Bank ranks the Philippines 94 out of 190 amendments favorably. countries in terms of paying taxes. • Although the banking sector is well capitalized, the IMF has warned against the risk posed to financial Political Risk: High stability by the rapid increase in credit growth, • President Rodrigo Duterte was elected for which is currently outpacing economic growth a six-year term in 2016. Although criticized gains.

Outlook/ Outlook/ Rated Companies ICR FSR Implication Implication Malayan Insurance Co., Inc. bbb+ Negative B++ Stable National Reinsurance Corporation of the Philippines bbb Negative B++ Negative The New India Assurance Company Limited a– Stable A– Stable (Philippines Branch) PGA Sompo Insurance Corporation bbb– Stable B+ Stable Starr International Insurance (Philippines Branch) a Stable A Stable

REINSURANCE DIRECTORY OF ASIA 2020 137 Singapore – Country Risk Tier

ingapore is a CRT-1 country with a low level of Political Risk: Low Seconomic and political risk and very low level • The government of Singapore is highly stable. The of financial system risk. Global trade tensions have People’s Action Party (PAP) has led the country weighed on Singapore’s economic outlook, reducing since the separation of Singapore from Malaysia in exports in electronics and precision engineering, 1965. This concentration of power has allowed for and growth in 2019 is expected to be under 2%. As policy continuity and predictability. a high-income economy, private consumption will • Recent PAP policies have focused on addressing primarily drive growth in 2019. concerns surrounding high immigration, social Inflationary pressures remain weak, with inflation mobility, and rising living costs. The PAP has been expected at around 1% for 2019. largely pro-business and focused on ensuring Singapore social stability. Economic Risk: Low • Singapore has a transparent legal framework that • Singapore’s economy is open, highly developed, efficiently protects contractual rights. The judiciary and affluent. Singapore’s economy is considered has a high capacity and corruption levels are very the second-freest in the world, according to the low, with the country ranking third in the latest Index of Economic Freedom. Corruption Perceptions Index. • The economy depends heavily on exports, • A long-standing maritime dispute with Malaysia making the country vulnerable to fluctuations in over territorial waters occasionally resurfaces, international demand. To promote the transition causing diplomatic tensions. However, this is to a more knowledge-based service economy, unlikely to escalate to military conflict. the government has provided support to firms investing in technology-based innovation. Financial System Risk: Very Low • Singapore’s demographic trends for long-term • The Monetary Authority of Singapore (MAS) growth are challenging. The government’s most is Singapore’s central bank, administering the recent budget includes a substantial increase in Insurance Act and rigorously supervising the social spending, including funding to increase financial sector. health and disability insurance coverage for the • Strong liquidity and solvency positions, significant older population. Revenue-raising measures, such foreign reserves, and the country’s status as a as increases to the Goods and Services tax rate, are strong next external creditor all contribute to an planned. adequate buffer against any external shocks. • Singapore’s tax system is transparent, with a • The banking system is healthy, with high levels relatively low corporate tax rate of 17%. Singapore of capital, excellent asset quality, and a low is second out of 190 countries in the World Bank’s number of non-performing loans. Systemic Ease of Doing Business survey, ranking first in the linkages between the property market and the world for contract enforcement. financial sector have led the MAS to focus its macroprudential policy on housing sector stability.

REINSURANCE DIRECTORY OF ASIA 2020 145 Outlook/ Outlook/ Rated Companies ICR FSR Implication Implication AIG Asia Pacific Insurance Pte. Ltd. a Stable A Stable Asia Capital Reinsurance Group Pte. Ltd. a– Negative A– Negative China Reinsurance (Group) Corporation (Singapore Branch) a Stable A Stable China Taiping Insurance (Singapore) Pte. Ltd. a Stable A Stable EQ Insurance Company Limited bbb+ Stable B++ Stable ERGO Insurance Pte. Ltd. bbb+ Negative B++ Stable Federal Insurance Company (Singapore Branch) aa+ Stable A++ Stable Great American Insurance Company (Singapore Branch) aa– Stable A+ Stable Singapore Korean Reinsurance Company (Singapore Branch) a Stable A Stable MS First Capital Insurance Limited a Stable A Stable Samsung Reinsurance Pte. Ltd. a Stable A Stable SCOR Reinsurance Asia-Pacific Pte Ltd aa– Stable A+ Stable Singapore Reinsurance Corporation Limited a– Stable A– Stable Starr International Insurance (Singapore) Pte. Ltd. a Stable A Stable Swiss Re Asia Pte. Ltd. aa Stable A+ Stable Transatlantic Reinsurance Company (Singapore Branch) aa– Stable A+ Stable United Overseas Insurance Limited aa– Stable A+ Stable

146 REINSURANCE DIRECTORY OF ASIA 2020 Taiwan – Country Risk Tier

aiwan, a CRT-2 region, has low levels of economic, pro-independence and currently controls both Tpolitical, and financial system risk. Taiwan’s the presidency and the unicameral parliament. economy relies on exports, which account for However, the opposition Kuomintang (KMT) party approximately 70% of GDP. With China as its primary defeated the DPP in local elections at the end of export destination, its growth outlook has been 2018, raising the possibility of political change. affected by China’s economic slowdown and US- • Although her party is pro-independence, President China trade tensions. A slowdown in the technology Tsai Ing-wen has pledged to maintain the country’s sector has also affected the country’s outlook. GDP close economic ties with mainland China, with the growth in 2019 is expected to be restrained at 1.9%. cross-strait integration generally stable. However, Inflation has been low and is projected to be Chinese pressure against the government has under 1% in 2019. Monetary policy should remain intensified during her tenure. accommodative, with continued low interest rates. • The legal system is well established, and the rule of law is strong. Contract enforcement in Taiwan ranks 11th in the world, according to the World Economic Risk: Low Bank. The cumbersome bureaucracy can obstruct • A heavy reliance on trade makes the economy efficient business operations. However, corruption vulnerable to external fluctuations. The is relatively contained, as Taiwan has a fairly benign increasingly negative global economic outlook Corruption Perceptions ranking. has weighed on the country’s prospects for • The main external security risk is heightened the coming year. Taiwan’s economy is highly pressure from mainland China to accept a “One integrated with China’s, as China is the destination China Policy,” a policy that is largely unpopular

for approximately 30% of Taiwan’s trade. with the Taiwanese electorate. Taiwan • Taiwan has a highly developed infrastructure, including advanced communications and transport systems. However, Taiwan’s Financial System Risk: Low • The Insurance Bureau, a branch of the Financial infrastructure remains vulnerable to natural Supervisory Commission, is the main insurance disasters, particularly typhoons and earthquakes. regulator. • At #13 in the world, Taiwan is considered to be • The KMT and the DPP are both pro-business one of the top countries in which to do business, and seek to attract foreign investments, and the according to the Ease of Doing Business survey. administration focuses on encouraging domestic The country benefits from a flexible labor market consumption. and a highly educated workforce. However, the • Taiwan’s current account runs a consistent population is aging rapidly – the country has one surplus,and its foreign-exchange reserves and of the world’s lowest birth rates. liquidity are extremely strong, serving as a Political Risk: Low buffer for global fluctuations. Banking sector • Presidential elections are coming up in 2020. capitalization is largely stable, and the number of The ruling Democratic Progressive Party (DPP) is non-performing loans is low.

Outlook/ Outlook/ Rated Companies ICR FSR Implication Implication Central Reinsurance Corporation a Stable A Stable Fubon Insurance Co., Ltd. a+ Stable A Stable Hotai Insurance Co., Ltd. a– Stable A– Stable Insurance Company of North America (Taiwan Branch) aa+ Stable AA+ Stable Shinkong Insurance Company Limited a Stable A Stable South China Insurance Co., Ltd. a Stable A Stable Union Insurance Company Limited a– Stable A– Stable

REINSURANCE DIRECTORY OF ASIA 2020 167 Thailand – Country Risk Tier

hailand, a CRT-3 country, has a low level of like the Eastern Economic Corridor and “Thailand Teconomic risk and moderate levels of political and 4.0.” financial system risk. Public-sector investment is expected to drive Political Risk: Moderate growth in the country over the medium term. • Thailand held general elections in March of 2019, The global economic slowdown, combined with for the first time since the 2014 coup. As expected trade tensions, has weighed on Thailand’s growth following changes to Thailand’s constitution projections by dampening exports; growth in 2019 is in 2017, Prime Minister Prayut Chan-o-cha expected at 3.4%. maintained his position. The ruling coalition government is pro-military and expected to Economic Risk: Low pursue social stability policies and infrastructure development. • A third of Thailand’s population is employed in • Thailand’s election’s results were not without agriculture, although the sector only contributes controversy, increasing the risk of protests. around 8% to GDP, with services contributing Instability within the coalition may make 56%, and industry, 36%. Thailand has one of legislation passage difficult. the lowest unemployment rates in the world, • Thailand’s legal system is relatively efficient, as the agricultural and informal sectors absorb although the judiciary can be subject to unemployed workers. corruption. Thailand ranks 99 out of 180 • Exports play a large role in the economy, in Transparency International’s Corruption accounting for two thirds of national income. Perceptions Index. Thailand’s top exports include office machine parts, electronics, automobiles and parts, and rubber. Financial System Risk: Moderate • To reduce rising pressure on its fiscal position, • The insurance industry is regulated by the Office the Thai government is exploring a variety of tax of the Insurance Commission under the Ministry of increases and new revenue sources, one example Commerce. being the implementation of a commercial • The financial system’s soundness is ensured by a property tax. The corporate income tax is likely to large current account surplus, a light debt service remain the same. Thailand has fairly a high ranking burden, and good relations with external agencies in the World Bank’s Ease of Doing Business Index, and creditors. • The banking sector is relatively stable; coming in at 27 out of 190 countries. However, Thailand ranking on paid taxes is 59 out of 190 countries. capitalization and liquidity are sufficient. The • Structural constraints are the main obstacle to number of non-performing loans is relatively low. sustained and rapid growth in the industrial The IMF has recommended that vulnerabilities sector—Thailand’s aging population and low in the nonbanking sector be closely monitored, birth rate remains a concern. The country’s although linkages between potential issue points infrastructure is well developed and should see and the wider financial sector remain limited. further advancements, thanks to planned projects

Outlook/ Outlook/ Rated Companies ICR FSR Implication Implication Asian Reinsurance Corporation bbb– Stable B+ Stable Bangkok Insurance Public Company Limited a– Stable A– Stable The New India Assurance Company Limited (Thailand Branch) a– Stable A– Stable Thaire Life Assurance Public Company Limited a– Negative A– Negative

REINSURANCE DIRECTORY OF ASIA 2020 175 Vietnam – Country Risk Tier

ietnam, a CRT-4 country, has a moderate level of Political Risk: High Veconomic risk, a high level of political risk, and a • A communist state, Vietnam’s one-party political very high level of financial system risk. system is very stable. Policy objectives are Driven by rising domestic demand and a predictable, although the government, headed expansive manufacturing sector, growth in Vietnam by Prime Minister Nguyễn Xuân Phúc and General will remain robust, at around 6.5% in 2019. Vietnam’s Secretary Nguyễn Phú Trọng, lacks transparency. manufacturing sector continues to see strong inflows • The government encourages private-sector of foreign direct investment, seemingly benefitting activities and participation, and seeks to attract from global supply chain shifts, as US-China trade foreign investments. The judicial system is tensions linger. not independent, but given the government’s friendly attitude towards businesses and foreign Economic Risk: Moderate investments, contract alteration and expropriation • Vietnam’s large and concentrated labor force, risks are low. cost competitiveness, and geographic location • Corruption is a major concern. Vietnam ranked 117 make it an attractive destination for foreign direct out of 180 countries in the most recent Corruption investment, which is largely concentrated on Perceptions Index; however, the country did enact manufacturing exports. According to the World an overhauled anti-corruption law in 2018. Bank, manufacturing accounted for 16% of GDP in 2018. Financial System Risk: Very High • Provided it receives legislative consent, the new • The Ministry of Finance’s Insurance Supervisory EU-Vietnam Free Trade Agreement should facilitate and Authority department is responsible for an increase in FDI inflows from Europe regulating the insurance industry. • At 3.5% in 2018, inflation was below the central • Vietnam is targeting adoption of Basel II standards bank’s target of 4%. Inflation is set to further in the banking sector by 2020. Rapid credit growth moderate in 2019 to under 3%, as oil prices remain at the start of the decade led to higher levels of relatively low and food prices remain stable. non-performing loans. However, with reforms • The country’s agricultural sector, which employs bank balance sheets are strengthening and nearly half the workforce, accounts for more than the tightening of credit policies has led to NPLs 18% of GDP. The sector is increasingly at risk for declining to approximately 6.5%. extreme weather events. • The IMF recommends the country continue • To maintain its strong growth record over the to build financial buffers and adopt a modern long term, Vietnam will need to make further macroprudential framework to contain financial progress in reforming ownership of state-owned stability risks. enterprises. The public sector drives approximately a third of the country’s economy; current initiatives to divest the state of ownership have so far fallen short of promised targets.

Outlook/ Outlook/ Rated Companies ICR FSR Implication Implication Vietnam

Bao Minh Insurance Corporation bbb Stable B++ Stable Vietnam BIDV Insurance Corporation bbb Stable B++ Stable Petrolimex Insurance Corporation bbb– Stable B+ Stable PVI Insurance Corporation bbb+ Stable B++ Stable PVI Reinsurance Joint-stock Corporation bbb Stable B++ Stable Samsung Vina Insurance Co., Ltd. a– Stable A– Stable Vietnam National Reinsurance Corporation bbb+ Stable B++ Stable

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