AUGUST 28, 2020 10:33 AM (EDT)
AM Best Affirms Credit Ratings of INPEX Insurance, Ltd.
FOR IMMEDIATE RELEASE
HONG KONG - AUGUST 28, 2020 10:33 AM (EDT)
The ratings reflect IIL’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The balance sheet strength is well-supported by IIL’s risk-adjusted capitalisation, which is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Over the most recent fiscal year, IIL’s BCAR score continued to improve, mainly driven by an increase in retained earnings, the impact of reserve releases, and lower business net retention.
IIL’s underwriting results over the most recent five-year period have been consistently positive, and contributed to an average net combined ratio of under 40% and an average return on equity of 6%. In fiscal-year 2019, net underwriting profit reported a decrease to USD 4.4 million from USD 5.1 million, mainly driven by the impact of certain factors, such as lower reserving releases and an increase in business service fees to its parent. Excluding the impact of changes in these factors, the company’s net underwriting profit would have increased slightly over this period.
IIL is a single-parent captive of INPEX CORPORATION (INPEX), which is the largest oil and gas exploration and production company in Japan. In its role as a single-parent captive, IIL mainly underwrites energy operational risks, of which the coverage mainly consists of property damage, third-party liability and operator’s extra expenses for its parent company, its affiliates and joint-venture companies. There is some concentration in areas such as product offering, although this is offset by the geographical diversification of its insurance portfolio. In addition, as INPEX continues to expand its global footprint, AM Best expects the geographical diversity of IIL’s portfolio to improve.
Positive rating actions could occur if IIL continues to maintain its very strong balance sheet strength, while delivering more stable underwriting and operating results. Negative rating actions could occur if there is a substantial increase in losses caused by a material shift in underwriting or reinsurance risk appetite. In addition, any significant deterioration in INPEX’s credit profile, including its operating profitability, financial leverage and interest coverage levels, could put downward pressure on IIL’s ratings.
AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.