FuSure Reinsurance retains excellent credit ratings

FuSure Reinsurance retains excellent credit ratings | Insurance Business America

Reinsurance

Tencent’s backing ensures stable future for HK-based insurer

Reinsurance

By
Mav Rodriguez

AM Best has affirmed the A- (Excellent) Financial Strength Rating and the “a-” (Excellent) Long-Term Issuer Credit Rating for Hong Kong-based FuSure Reinsurance Company Limited (FuSure). The outlook for both ratings is stable.

The strong ratings reflect FuSure’s very strong balance sheet, adequate operating performance, limited business profile, and appropriate enterprise risk management (ERM). The ratings are also supported by Tencent Holdings Limited (Tencent), FuSure’s parent company.

In 2023, FuSure received a significant capital injection from shareholders, doubling its paid-up capital to RMB 1.75 billion by year-end. AM Best expects the company’s risk-adjusted capitalization, measured by Best’s Capital Adequacy Ratio (BCAR), to stay at the strongest level through 2027, according to FuSure’s business plan.

The company follows a conservative investment strategy, focusing on investment-grade fixed-income securities and cash equivalents. Additionally, FuSure has successfully diversified its retrocessionaire panel, which includes a sound credit rating reinsurance panel. However, its relatively modest capital size and the risks of expanding its client base were noted as challenges.

FuSure’s operating performance is considered adequate. Since starting operations in 2021, the company has shown improvement, with double-digit growth in gross premiums written projected from 2024 to 2027. The company maintains a low single-digit return on equity, with stable investment yields from short-duration fixed-income investments. Underwriting volatility is limited due to the stable nature of its key health coverage treaties.

Focusing on health and accident insurance in the Greater China region, FuSure leverages Tencent’s business development and distribution support to build market presence. Although its portfolio is concentrated in health insurance, the product risk is moderate, as the underlying policies are short-duration personal health insurance. FuSure plans to diversify its products and geographic reach in the medium term. While facing higher operational and business execution risks as a startup, these are mitigated by an experienced management team and strategic support from Tencent.

FuSure’s ERM framework was deemed suitable for its risk profile, with defined risk appetite, a three lines of defense governance structure, various risk policies, and stress testing. The company performs annual Own Risk and Solvency Assessments (ORSA) submitted to the Hong Kong Insurance Authority. As FuSure grows, AM Best expects further enhancements to its ERM framework.

FuSure also benefits from strong support from Tencent, which owns 85.01% of the company. Tencent’s substantial financial resources and commitment to FuSure, evidenced by a 2023 capital injection, are significant factors. This support includes capital, operational assistance, and technological innovation, giving FuSure a competitive edge in product design and pricing.