Nan Shan Life Insurance Co (南山人壽) and Nan Shan General Insurance Co (南山產物保險) last week suffered another setback as Taiwan Ratings Corp (中華信評) placed its credit ratings for the companies on “Credit Watch” with negative implications due to problems associated with their new information technology (IT) system.
The ratings agency’s move came a week after the Financial Supervisory Commission sanctioned the companies, ordered them to halt sales of investment-linked products and fined Nan Shan Life NT$30 million (US$966,433) and Nan Shan General NT$6 million.
On Sept. 17, the commission penalized Nan Shan Life and Nan Shan General for failing to solve issues regarding the “Envision Project” IT system, which has caused problems with about 152,000 policies.
“The recent disclosure of the IT system issues as well as sales restrictions on investment-linked products could weaken Nan Shan Life’s franchise relative to that of similar-rated local peers,” Taiwan Ratings, a local arm of S&P Global Ratings, said in a statement on Thursday.
Nan Shan Life therefore faces greater challenges maintaining its strong brand, reputation and above-industry-average capital adequacy, Taiwan Ratings said.
IN TANDEM
“Our ratings for Nan Shan General reflect its highly strategic status to Nan Shan Life. The rating on the general insurer therefore move in tandem with those on its parent,” it said.
Taiwan Ratings maintained its “twAA+” long-term issuer credit rating and financial strength rating for Nan Shan Life and Nan Shan General.
The agency said that it might lower the ratings by one notch if the possibility increases of the IT system issues not being resolved by the end of this year, or the company’s financial and investment strategies become more aggressive than expected.
This story has been modified since it was first published to clarify Taiwan Ratings Corp's action was to place Nan Shan units on CreditWatch, rather than downgrading its rating outlook for the units to negative.
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