New Zealand’s Quest Insurance, mainly a provider of mechanical breakdown insurance (MBI) and comprehensive vehicle insurance (CVI), has had its ratings affirmed by AM Best.

The ratings agency retained the insurer’s financial strength rating of B and long-term issuer credit rating of bb+.

AM Best says the insurer’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which is at the strongest level in fiscal year 2020, as measured by the agency’s Best Capital Adequacy Ratio

“AM Best considers Quest’s asset quality to have improved following the sale of an illiquid private equity investment during fiscal year 2021, with prospective asset allocation expected to include cash, term deposits and affiliated loans over the medium term,” the agency said.

“A partially offsetting balance sheet factor is the company’s small absolute capital base, which exposes risk-adjusted capitalisation to volatility in the event of stressed scenarios.”

The agency says the company’s scale of operation has increased significantly in recent years, driven by both the growth in its direct channels and a strategic partnership with Janssen Insurance Limited, a third-party distributor of motor-related insurance.

“This has significantly diversified Quest's distribution channels outside of affiliated business written in conjunction with its intermediate parent group, Geneva Finance Limited,” AM Best said.

“Quest’s near-term projected underwriting growth is expected to be driven by increased volumes written through the partnership with Janssen, as well as from entering into new direct distribution deals for MBI and CVI business.”