The review for downgrade on Peak Re’s A3 IFSR follows Moody’s rating action on June 14, 2022 to place on review for downgrade the Ba3 corporate family rating of Peak Re’s majority shareholder, Fosun International Limited (Fosun, Ba3 review for downgrade).
The rating action on Peak Re mainly reflects Moody’s concern that contagion risks to Peak Re will increase as Fosun’s credit profile weakens. The contagion risks, particularly via reputational damage, could increasingly strain Peak Re’s business growth and capital market access. In addition, Moody’s considers the contagion risks that Fosun might influence Peak Re’s risk appetite
Hong Kong:
Moody’s Investors Service has placed on review for downgrade the A3 insurance financial strength rating (IFSR) of Peak Reinsurance Company Limited (Peak Re).
Moody’s has also placed on review for downgrade the Baa2(hyb) backed subordinated debt rating of the subordinated perpetual securities issued by Peak Re (BVI) Holding Limited. These securities are irrevocably and unconditionally guaranteed by Peak Re.
The outlook has been changed to ratings under review from stable.
The review for downgrade on Peak Re’s A3 IFSR follows Moody’s rating action on June 14, 2022 to place on review for downgrade the Ba3 corporate family rating of Peak Re’s majority shareholder, Fosun International Limited (Fosun, Ba3 review for downgrade).
The rating action on Fosun mainly reflects concern that public bond market investors’ increasing risk aversion will pressure Fosun’s liquidity while credit contagion risk from Fosun’s core property subsidiaries is also increasing.
The rating action on Peak Re mainly reflects Moody’s concern that contagion risks to Peak Re will increase as Fosun’s credit profile weakens. The contagion risks, particularly via reputational damage, could increasingly strain Peak Re’s business growth and capital market access. In addition, Moody’s considers the contagion risks that Fosun might influence Peak Re’s risk appetite.
Given the weakening credit profile of Fosun, these contagion risks would linger despite the ringfencing measures in place that safeguard the financial resources at Peak Re. These measures include an independent board without majority control by Fosun, stringent related-party transaction policies and strong regulatory oversight.
Given that Fosun’s ratings could be downgraded to deeper speculative grade levels because of its tight liquidity and refinancing risk,
Moody’s rating action on Peak Re reflects the potential need of positioning the ratings to reflect such contagion risks. As a result, Moody’s considers governance factor under its environmental, social and governance (ESG) framework, a key driver of today’s rating action, given Peak Re’s ownership by Fosun and Fosun’s governance practices.
That said, Peak Re’s standalone credit profile remains sound, reflecting the reinsurer’s good franchise in the Asian reinsurance market, solid capitalization, expanding product and geographic diversification, and product mix with low reserving risk.