Market Overview

A.M. Best Affirms Credit Ratings of Korea P&I Club


A.M. Best has affirmed the Financial Strength Rating of A-
(Excellent) and the Long-Term Issuer Credit Rating of "a-" of Korea P&I
Club (KP&I) (South Korea). The outlook of these Credit Ratings
(ratings) is stable.

The ratings reflect KP&I's balance sheet strength, which A.M. Best
categorizes as strong, as well as its strong operating performance,
limited business profile and appropriate enterprise risk management. The
ratings also reflect the wide range of support the club receives from
the South Korea government.

KP&I's balance sheet strength is underpinned by risk-adjusted
capitalization at the strongest level, as measured by Best's Capital
Adequacy Ratio (BCAR). Although the growth rate of free reserves in 2017
slowed because of the reduced earnings from exchange rate losses, the
five-year average growth rate stands high at 11%. The club's low
underwriting leverage and conservative investment profile also support
its strong capitalization.

KP&I has maintained highly profitable operating performance with the
five-year average return on equity of 10% with a modest level of
volatility. However, the club experienced a sharp drop of net income in
2017 mainly due to the impact of exchange rate movement on its
underwriting and investment performance.

With its business primarily concentrated in Korea, KP&I maintains about
16% of market share based on premium within the domestic market. Amid
the prolonged recession in the shipping industry and increasing
competition, multiple initiatives are on the way to secure its market
position: strategic partnership with a member of International Group of
P&I Clubs, new business opportunity under the government's plan to build
new vessels to support Korean shipping industry, and overseas expansion

KP&I's risk management capabilities are considered appropriate given its
risk profile. The club follows strict underwriting guidelines and
maintains conservative reinsurance strategy.

KP&I was founded in 2000 under the Ship-Owners' Mutual Protection and
Indemnity Association Act. The club benefits from various support from
the South Korea government pivoting on its strategic role in the
long-term development of the country's marine infrastructure, which
serves as a positive rating factor.

Negative rating actions could occur if there is a material decrease in
the club's risk-adjusted capitalization or sustained deterioration in
its operating performance.

Ratings are communicated to rated entities prior to publication.
Unless stated otherwise, the ratings were not amended subsequent to that

This press release relates to Credit Ratings that have been published
on A.M. 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 A.M. Best's
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Best's Credit Ratings
. For information on the proper media
use of Best's Credit Ratings and A.M. Best press releases, please view
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