Seoul: AM Best has revised the outlook to negative from stable for the long-term issuer credit rating (Long-Term ICR) and affirmed the financial strength rating (FSR) of B++ (Good) and the long-term ICR of ‘bbb+’ (Good) of Korea P and I Club (KP and I). The outlook of the FSR remains stable, reflecting KP and I’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile, and appropriate enterprise risk management.

According to BERNAMA News Agency, the global credit rating agency stated that the ratings also reflect the wide range of support that the company receives from the South Korean government. The revision of the Long-Term ICR outlook to negative from stable highlights increased pressure on KP and I’s operating performance, following its sizeable net loss reported in 2024, which notably deviated from AM Best’s expectations.

KP and I experienced two exceptionally large claim losses last year, leading to a record annual 7.3 billion Korean won net loss and a combined ratio of 204 percent in 2024. This situation has raised concerns regarding underwriting volatility and the high susceptibility of its bottom line to large claims under the current structure of a small premium base, high net retention level, and a loss-sensitive commission scheme.

Furthermore, KP and I’s risk-adjusted capitalisation is assessed at the strongest level, as measured by Best’s Capital Adequacy ratio, and is expected to remain at that level over the intermediate term. Despite a moderate drop in available capital following a significant net loss in 2024, the company’s balance sheet strength is supported by its low underwriting leverage and a highly conservative investment portfolio.

Underpinned by its strategic role to support the long-term development of maritime infrastructure in South Korea, KP and I receives a wide range of government support across various areas, including subsidies, corporate tax exemptions, and a no-dividend payout policy to its members.