HONG KONG–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of INPEX Insurance, Ltd. (IIL) (Bermuda). The outlook of these Credit Ratings (ratings) is positive.
The ratings reflect IIL’s balance sheet strength, which AM Best assesses 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). The company’s total capital also was strengthened to USD 262 million as of 30 June 2022, from USD 109 million as of 31 December 2021, following a capital injection from its parent company, INPEX CORPORATION (INPEX) with the aim of expanding IIL’s underwriting capacity.
IIL’s underwriting results over the most recent five-year period (FY2017 – FY2021) were consistently positive, and contributed to an average net combined ratio of under 40% and an average return on equity of 5%. In fiscal year 2021, the company’s net underwriting profit increased by USD 1.6 million to USD 5.7 million compared with fiscal year 2020. Prospectively, AM Best expects the company to have significant growth in premium income over the next few years following the capital injection from INPEX, while its combined ratio continues to be favourable over the short to medium term.
IIL is a single-parent captive of 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 and IIL underwrites new risks, AM Best expects the geographical and product diversity of IIL’s portfolio to improve.
The positive outlooks reflect AM Best’s expectation that IIL will continue to deliver consistently positive operating results, supported by continued premium growth with strong underwriting margins and favourable claims experience for its core lines of business.
Positive rating actions could occur if IIL continues to maintain its very strong balance sheet strength, while delivering more stable and sustainable underwriting results. Negative rating actions could occur if there is a substantial increase in losses caused by a material shift in 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.
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