Kathmandu. Non-life insurance company, Neco Insurance has received renewed support for its previous rating as a share issuer insurer. Credit rating agency Infomerics Nepal has continued Neco Insurance’s previous IRN A+ IR for issuer rating.
According to Infomerics, an insurer with such a rating has sufficient guarantees to fulfill its financial obligations on time. In addition, there is very low risk involved in debt-related liabilities. Neco Insurance has achieved a growth rate of 7.5 percent in total insurance premium income in the last fiscal year 2080.81. It has also succeeded in renewing 57 percent of its old customers’ insurance through renewal.
Infomerics cited the insurance company’s strong claims ratio as a factor behind the strong rating. In the previous fiscal year 2079.80, the claim ratio was 49 percent, but in the last fiscal year it was limited to 43 percent. Its underwriting surplus (risk reduction savings) remained at Rs. 8 million due to catastrophic reinsurance management, prudent claims management and a declining claims ratio. Infomerics has mentioned in the statement that the savings are significant even though the insurer has asked for additional reserves for earthquake risk.
Infomerics has also included investment diversification as a strong point of Neco Insurance. Its investment increased by 24 percent in a year and stood at Rs 6.3 billion in the last fiscal year. The solvency ratio has also increased from 3.32 in the previous fiscal year to 3.84 in the last fiscal year.
Infomerics Nepal has mentioned the business dependence of Neco Insurance, which occupies a total of 8 percent share in the non-life insurance market, as a challenge. Motor insurance occupies 50 percent of its net insurance premiums. Similarly, property insurance occupies 37 percent. Small insurance and aviation insurance contribute only 1 percent, engineering insurance 3 percent and marine insurance contributes only 4 percent.
Neco Insurance’s cash liquidity position depends on premium income from motor insurance and property insurance. It has been continuously renewing insurance of 70 to 80 percent in motor insurance and 50 to 60 percent in property insurance among its old customers. The claim ratio of motor insurance, which has a commission rate of 6 percent, is 60 percent. Infomerics Nepal has also pointed out possible changes in regulatory provisions and professional dependence as weaknesses and challenges.
