AM Best Assigns Credit Ratings to The Tokio Marine and Nichido Fire Insurance Company (China) Limited

AM Best has assigned a Financial Strength Rating of A (Excellent) and a Long-Term Issuer Credit Rating of “a” (Excellent) to The Tokio Marine and Nichido Fire Insurance Company (China) Limited (TMNCH) (China). The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings of TMNCH reflect its balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM). The ratings also factor in the rating enhancement from its parent, Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF), which is the main insurance operating entity of Tokio Marine Holdings, Inc.

Established in 2008, TMNCH is a small sized, long-standing player in China’s non-life insurance markets. The predecessor of TMNCH was TMNF’s Shanghai Branch, which was founded in 1994. The company is 100% owned by TMNF, the first Japanese non-life insurance company with operations spanning across various markets and lines of business globally. TMNCH benefits from preferential access to Japanese interests abroad business in China given its affiliation and common branding with TMNF. The company also receives various implicit support from TMNF, including reinsurance protection, management oversight, and risk framework and governance.

TMNCH has gross premiums written (GPW) reaching RMB 976 million in 2024, which represents less than 1% of its total market share. The company has a moderately diversified underwriting portfolio, consisting of motor, fire, marine, liability and other lines. In terms of its distribution channel, around 70% of TMNCH’s GPW are underwritten by inward treaty contracts or on a direct basis, while the remainder is sourced through brokers and agents.

AM Best assesses TMNCH’s risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), supplemented by its low underwriting leverage and conservative investment strategy, as well as positive liquidity. The company’s capital and surplus remains comparatively modest, but stable, driven by partial profit retention over the years, and its solvency stays robust with a comfortable buffer above the regulatory requirement.

AM Best views TMNCH’s operating performance as strong, as demonstrated by a five-year average (2019-2023) operating ratio of 88.9% and a return-on-equity (ROE) ratio of 11.6%. Investment results continue to be supported by a stable stream of interest income derived from deposits and money market funds. In 2024, the company’s top-line performance was affected by the slowdown in the business activity of Japanese entities in China, as well as a more cautious approach to risk selection. Despite the headwinds, TMNCH’s operating performance has been further enhanced, due to an improvement in its loss ratio. Additionally, the company has maintained a double-digit ROE ratio. Moving forward, TMNCH will continue to explore business opportunities in the upstream and downstream industries of Japanese clients.

Negative rating actions could occur if there is a material deterioration in TMNCH’s operating profitability, for instance, due to reduced underwriting profit, which no longer supports favourable assessment or continued headwinds in the top-line. Negative rating actions also could occur if there is a reduced level of support from its parent. Although it is unlikely in the near term, positive rating actions could occur if there is a material improvement in TMNCH’s risk-adjusted capitalisation.

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

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

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

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