A.M. Best Affirms 'A++' -Superior- Rating On Tokio Marine & Fire
A.M. Best Co. has affirmed its "A++" (Superior) rating on the Tokio Marine & Fire Insurance Co. and its U.S. branch. Established in 1879, Tokio Marine is the largest and oldest non-life insurance company in Japan.
A.M. Best's rating reflects Tokio Marine's superior capitalization and underwriting profitability and its market leadership position. It also reflects the company's dominant position in the Japanese non-life insurance market, which is the second largest in the world. The superior underwriting results are evidenced by its 90.9 combined ratio for the fiscal year and its average combined ratio in the low 90's for the past five years.
By Japanese market standards, Tokio Marine maintains superior solvency. The company is well protected from catastrophe exposure, including those exceeding a 100-year event for both earthquake and windstorm. The company maintains extensive reinsurance protection and strong catastrophe reserves that are more than sufficient to protect surplus from such events even without taking into consideration the extensive unrealized capital gains of the company.
Offsetting these positive attributes are recent weak economic conditions in Japan and the continuing low interest rate environment, which limits the growth of investment profit. The ongoing financial regulatory reform of the Japanese insurance and financial services industries has created uncertainty in the market. A market-wide premium reduction, at least in the short term, appears inevitable from increased competitive pressure anticipated after the dismantling of tariff systems in the automobile lines in July 1998.
Although the competitive pressure will increase, A.M. Best believes changes will be gradual because of the continuing supervision of the regulatory authority over forms and rates submitted by each company. Tokio Marine, with its superior resources, will be one of the beneficiaries of the reform, as it can use its strength to develop new products and explore new areas of operations more effectively, including expanding its life insurance operations of the subsidiary.