The financial strength ratings of Sirius International Insurance Group (SIIG) and its main rated subsidiaries are unaffected from the debt and liquidity difficulties of its approximate 80 percent shareholder China Minsheng Investment Group (CMIG), AM Best has stated.
By contrast, Fitch Ratings placed Sirius International Group on rating watch negative, voicing concerns around the potential negative implications to Sirius’ competitive market position from being owned by a severely strained majority shareholder.
CMIG worried investors with a late bond repayment in January 2019, and recently announced that cross-default provisions on $800 million of its subsidiaries' bonds had been activated.
AM Best suggested that SIIG has safeguards in place that shield the company’s financial strength from potential adverse parental influence, including the risk of capital extraction to a level that would be detrimental to its operations.
Following its listing on Nasdaq in November 2018, SIIG is said to comply with the exchange’s listing requirements, and has implemented “solid governance arrangements”, with a largely independent board of directors, AM best said.
Five out of the seven board members are independent non-executive directors, one is SIIG’s CEO Kip Oberting, and a representative of a CMIG affiliate.
AM Best also suggested SIIG and its rated subsidiaries operate in jurisdictions considered to have strong regulatory oversight, notably Bermuda, the United States, Sweden and the United Kingdom.
“In AM Best’s opinion, these elements insulate SIIG and its subsidiaries from the debt and liquidity difficulties of CMIG,” said AM Best. “However, the current situation at CMIG constitutes a significant test of these safeguard mechanisms, and should they prove less effective than anticipated, AM Best would promptly review the ratings of SIIG and its rated subsidiaries. Rating actions could also be triggered should there be a deterioration in SIIG’s rating fundamentals due to the reputational risk associated with CMIG. A change in control of SIIG would also lead AM Best to review the ratings.”
AM Best, Sirius, China Minsheng, China, Bermuda