Inpex Bermuda captive rating affirmed by AM Best
AM Best has affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” (Excellent) of the single-parent captive of Inpex, the largest oil and gas exploration and production company in Japan.
The outlook of these credit ratings for the Bermudian-based Inpex Insurance Ltd 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.
The company’s total capital also was strengthened to $262 million as of June 30, 2022, from $109 million as of December 31, 2021, following a capital injection from its parent company, Inpex Corporation 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 per cent and an average return on equity of 5 per cent.
In fiscal year 2021, the company’s net underwriting profit increased $1.6 million to $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.
In its role as a single-parent captive, IIL mainly underwrites energy operational risks, of which the coverage consists mainly 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.