Environmental risk is seen as an important consideration in S&P Global Ratings’ credit analysis of the Toa Reinsurance group. Toa Re group’s key risk is catastrophe risk and its exposure is somewhat concentrated on Japan, typically typhoons, notes S&P Global Ratings analyst Koshiro Emura.
These comments are published in the international credit agency’s report titled “ESG Industry Report Card: Asia-Pacific Insurance Companies”.
Mr Emura said, “We expect the group’s capital base to reduce due to the back-to-back typhoon losses: Jebi in 2018, and Faxai and Hagibis in 2019. Further, environment risk factors surrounding natural catastrophes could possibly intensify in its scale and complexity going forward.
“We see mitigating factors: the group has abundant capital buffers, sound reinsurance protection scheme, and the ability and track-record to raise capital.”
However, in terms of business size and risk diversification to mitigate the significant home country losses, Toa Re group somewhat lags those of large global reinsurers. While the group shifted its business expansion to Europe into high gear since 2018, S&P believes it would take some time for the European business to make a large contribution, and the group might face challenges in new risk exposure management and groupwide governance during the expansion.”
S&P says that it incorporates ESG factors into its analysis where it believes related risks and opportunities are both material and relevant to creditworthiness. S&P states that general ESG credit factors are embedded in its ratings of A+/Stable/– for Toa Re.