Fitch Ratings has affirmed the Insurer Financial Strength (IFS) rating on China Export & Credit Insurance Corporation (SINOSURE) at ‘A+’ (Strong) while maintaining its negative outlook.
The ratings agency said that the affirmation reflects SINOSURE’s policy-oriented role in supporting China’s export activities and its government ownership. Fitch uses a top-down approach in assessing the insurer’s financial strength, and SINOSURE’s IFS rating is aligned with China’s ‘A+’ sovereign rating.
The negative outlook on the rating continues to mirror the negative outlook on the sovereign rating.
Fitch expects returns from investments to remain the key contributor to SINOSURE’s overall earnings in 2024. Higher investment income and a reduction in the unrealised losses from foreign-currency investments led to an improvement in the insurer’s accounting profits in 2023. However, SINOSURE’s policy-oriented role means profit maximisation is not its key strategic priority. Fitch believes its long-term underwriting earnings are likely to remain marginal.
SINOSURE maintains a prudent strategy in managing its investments, with cash, term deposits, and bonds as key components. Allocation to Fitch-defined risky assets, mainly equity and equity-related funds, accounted for about 27% of the company’s equity capital at the end of 2023. The company keeps a significant portion of its invested assets in US dollar fixed-term deposits domestically to support potential cash outflows from US dollar claim liabilities.
Fitch expects SINOSURE to sustain adequate capitalisation to support the expansion of its underwriting business and to weather underwriting volatility. Its net leverage likely remained stable in 2024, given consistent surplus growth, with net leverage at about 2.1x at the end of 2023. The insurer’s shareholders are likely to extend capital support if needed. The company maintained its solvency ratio as measured by China’s Risk-Oriented Solvency System (C-ROSS) above the regulatory minimum at the end of the third quarter of 2024.
SINOSURE has a strong profile in China’s export credit insurance market, supporting the development and stability of foreign trade. It offers insurance coverage to underpin the trading activity and internationalisation of Chinese companies. Fitch expects SINOSURE to maintain its solid presence in export credit insurance, given its nationwide distribution and service networks. It is the only insurer providing medium- and long-term export credit insurance and overseas investment insurance in China. The company’s rating is aligned with China’s sovereign rating due to its ownership structure and policy-oriented function.
