AM Best Downgrades Credit Ratings of Berking Re Limited; Places Credit Ratings Under Review With Negative Implications

AM Best has downgraded the Financial Strength Rating to B- (Fair) from B (Fair) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bb-” (Fair) from “bb+” (Fair) of Berking Re Limited (Berking Re) (Bermuda). Concurrently, AM Best has placed these Credit Ratings (ratings) under review with negative implications.

The ratings reflect Berking Re’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).

The rating downgrades reflect a deterioration in Berking Re’s balance sheet strength fundamentals, as well as ERM assessment. Berking Re’s capital base weakened in 2024, driven by its limited initial capital size and accumulation of operating losses. The company’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), is exposed to heightened potential volatility arising from the weaker-than-expected capital base along with the increase in risk exposure. In addition, the company has experienced a delay in the compilation of financial information for written business, which inhibits the preparation of timely business records, as well as the effectiveness of financial performance review and governance. AM Best expects Berking Re to take proactive actions to mitigate this shortcoming, as well as continue to bolster its corporate governance and risk management framework.

The under review with negative implication status reflects AM Best’s uncertainty regarding the capital position of Berking Re, which depends on the execution of capital plans by the parent company, PFY Health Technology Co., Ltd (PFY Cayman or PFY Group), and a clearer visibility into the company’s latest financial performance for full-year 2024. Based on the information provided by the company, PFY Cayman is in the process of fund raising, followed by a planned material capital injection to Berking Re in the near term. In the event that PFY Cayman fails to successfully execute its capital plan without alternative contingent capital support, AM Best expects Berking Re’s capital position to exhibit a fast deteriorating trend and no longer be supportive of its current balance sheet strength assessment. Moreover, AM Best views Berking Re as being exposed to potential contagion risk stemming from its parent group, given that PFY Cayman and its major operating subsidiary, PFY Health Technology (Shanghai) Co., Ltd, have exhibited capital erosion from sustained operating losses and adverse deviation from business and capital plans.

The ratings will remain under review with negative implications pending the execution of PFY Cayman’s capital plans in the near future and more visibility into Berking Re’s audited financial performance for 2024. AM Best will continue to hold discussions with PFY Group’s management team on its financial performances and capital plan execution to assess the impact to Berking Re’s credit profile. AM Best also will continue to monitor the situation and provide updates as conditions warrant.

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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