Moody’s affirms Chinese insurer ratings, but cites trade tension risk

Moody’s Ratings has affirmed the ratings and maintained negative outlooks on eight Chinese insurers and one related overseas subsidiary, following its affirmation of China’s A1 sovereign rating with a negative outlook.

The nine insurers affected are: China Life Insurance Co. Ltd., China Life Insurance (Overseas) Company Ltd., China Life P&C Insurance Company Limited, China Pacific Life Insurance Co. Ltd., China Pacific Property Insurance Co. Ltd., China Railway Captive Insurance Co. Ltd., CNPC Captive Insurance Company Limited, ICBC-AXA Assurance Co. Ltd., and PICC Property and Casualty Company Limited.

The affirmation of China’s sovereign rating takes into account the country’s large, dynamic economy and capacity for innovation, although Moody’s expects potential growth to slow.

Moody’s noted that the negative outlook is driven by the risk that prolonged trade tensions between China and key trading partners could have a lasting negative effect on the country’s credit profile.

The rating agency stated, “Under Moody’s joint default analysis (JDA) approach for Government Related Issuers (GRIs), the rating or credit quality of a government that provides extraordinary support to a GRI is a key input for that GRI’s ratings. The issuers on the List of Affected Credit Ratings include six GRIs, which are sensitive to a potential decline in the rating or credit quality of their owner government and ultimately of the central government and three insurers which ratings incorporate support uplift from their state- owned parents.”

Moody’s expects the Baseline Credit Assessments (BCAs), or standalone credit profiles, of the nine insurers to remain stable, and that support from their state-owned parents and the Chinese government will remain unchanged due to state ownership and their strategic importance.

The negative outlook reflects downward pressure on the capacity of the Chinese government and their state-owned parents to provide support.