S&P predicts modest capital upkeep for PICC Group amidst market changes

The insurance group benefits from risk diversification, supporting its capital adequacy.

China’s PICC Reinsurance Co. is expected to grow premiums at 8% to 10% over the next two years, with a balanced growth contributed by its property/casualty and life reinsurance business. The reinsurer will focus on risk aggregation review and portfolio optimization to narrow underwriting losses.

PICC Group's capital buffer at the parent group level could withstand capital and earnings volatility. 

However, volatile capital markets and low-interest rates could impact investment returns, leading to earnings fluctuations. Additionally, the dominance of the property/casualty insurance segment exposes the group to higher frequency and severity of extreme weather events.

PICC Group's well-recognized brand and extensive geographic presence, coupled with its leading market position, provide a competitive advantage in China's insurance market. 

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S&P expects the group to maintain a modest level of capital reflecting its growing capital need. Its stable outlook reflects S&P Global Ratings’ expectation that PICC Group will maintain its group credit profile over the next two years. 

The implementation of revised criteria has not significantly impacted the assessment of PICC Group's overall group credit profile. S&P also expects the insurance group to maintain modest capital and earnings over the next two years.

The insurance group benefits from explicit recognition of risk diversification, supporting its capital adequacy. However, higher capital charges offset some of these improvements.

S&P expects PICC Re to play an increasing role in the group's risk management strategy and gradually introduce industry insights and best practices to the Chinese insurance market.