SINGAPORE--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Energas Insurance (L) Limited (Energas) (Malaysia). The outlook of these Credit Ratings (ratings) is stable.
These ratings reflect Energas’ balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management. In addition, the ratings include a neutral impact from the company’s 100% ownership by and integration with Petroliam Nasional Berhad (Petronas), which is ultimately owned by the government of Malaysia.
The company’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remains at the strongest level, supported by Energas’ low underwriting leverage, conservative investment strategy and strong liquidity. As of December 2018, approximately 90% of its investment assets were held in cash and deposits, which was an amount equal to almost five times the company’s net technical reserves. Offsetting factors include the company’s exposure to high severity claims and heavy reliance on reinsurance to underwrite large risks. Nonetheless, Energas utilizes a comprehensive reinsurance program to manage its underwriting risks, and its reinsurance panel is of excellent credit quality.
Despite experiencing volatility in its claims ratio, the company’s underwriting results remain strong, as demonstrated by a five-year average combined ratio of 53% (2014-2018). This performance has been supported by low operating costs and favorable commission income. Nonetheless, a prolonged downturn in the global oil market could lead to a reduction in capital spending by Energas’ parent company, Petronas. As a result, Energas may face a decline in premium volume, which could put pressure on the company’s future operating results.
Energas is a pure captive of Petronas, Malaysia’s national oil and gas company. The company underwrites mainly on- and offshore engineering, as well as marine and property risks for its parent and affiliated companies. Energas is well-integrated into the parent’s risk management framework, which optimizes insurance protection for the group in terms of scope and costs. A limiting factor is the product concentration in Energas’ portfolio, in which the engineering class accounts for more than 80% of gross premium written.
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.
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