Best Affirms ‘B+’ Rating of NZ’s Pioneer Insurance

A.M. Best Co. announced that it has affirmed the financial strength rating of B+ (Very Good) of New Zealand’s Pioneer Insurance Company Limited, with a stable outlook.

“The rating reflects Pioneer’s adequate capital, strong liquidity, conservative reinsurance arrangement and short-tail risk exposure,” said Best. It added that “as a start-up motor insurer, the company is well positioned to benefit from the support of its stakeholders in marketing and claims management.”

Best noted that “given its lack of critical mass in its early stages, Pioneer has been adopting a prudent reinsurance arrangement to stabilize its underwriting experience. A stop-loss reinsurance cover that has been established with Munich Re of Australasia, as well as the excess of loss and facultative reinsurance arrangements, serve to limit the company’s exposure to a manageable level.

“In terms of business profile, Pioneer benefits from distribution agreements with its finance company clients, which will conduct the sales and marketing function. Claims management services are outsourced to CRM Motor, an experienced captive manager in the field of motor insurance.

“These strengths are partially offset by lack of historical record and volatile underwriting experience.

“The current operation was relatively less active than expected. The premium growth forecast by Pioneer for fiscal year 2004 is aggressive without a secure level of capitalization to sustain it.”

Best said it “remains cautious about the company’s ability to execute the strong growth in underwriting performance and to maintain a secure level of capitalization. Strict adherence to these guidelines is critical to the rating’s future stability.”