, China
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Hyundai Insurance China faces capital challenges amidst expansion

HIC is diversifying into personal lines, focusing on ride-hailing drivers and motor insurance.

Hyundai Insurance’s (China) (HIC) anticipated rapid deterioration in its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), is caused by rising underwriting risk and the expected capital erosion from cumulative operating losses in the near to intermediate term.

As of year-end 2023, HIC’s risk-adjusted capitalisation was at its strongest level, supported by a capital injection of RMB1.7b from strategic investors in 2020. 

This change in shareholding, from a wholly owned subsidiary of Hyundai Marine & Fire Insurance to a joint venture with local and Korean shareholders, has allowed HIC to leverage its shareholders' customer base and technology. 

HIC is diversifying into personal lines, with a focus on ride-hailing drivers and motor insurance premium growth. 

However, the company is expected to continue incurring operating losses, which AM Best believes will weaken HIC’s risk-adjusted capitalisation and affect its balance sheet strength.

HIC’s operating performance is deemed marginal, with consistent negative results since 2021 due to widening underwriting losses, despite stable investment income. Rapid expansion in ride-hailing motor insurance, especially for new energy vehicles, poses higher pricing and underwriting risks. 

AM Best anticipates that HIC will require more time to achieve economies of scale and reduce its high expense ratio, with no expectation of short-term profitability.

Despite significant top-line growth, HIC is expected to remain a minor player in China’s non-life insurance market due to intense competition and market concentration among leading players.

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