A.M. Best has affirmed Energas Insurance’s financial strength rating of A (Excellent) and the long-term issuer credit rating of “a”.
The outlook of these credit ratings (ratings) is stable.
A.M. Best categorised Energas’ balance sheet strength as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
According to A.M. Best, the ratings include a neutral impact from the company’s 100 percent ownership by integration with Petroliam Nasional Berhad (Petronas), which is ultimately owned by the government of Malaysia.
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.
A.M. Best noted that Energas is well-integrated into the parent’s risk management framework, which optimises insurance protection for the group in terms of scope and costs.
However, the rating company explained that a limiting factor is the product concentration in Energas’ portfolio, in which the engineering class accounts for more than 80 percent of gross premium written.
A.M. Best said that as of December 2018, approximately 90 percent 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, however, Energas utilises a comprehensive reinsurance programme 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 percent (2014 to 2018).
A.M. Best highlighted that the company’s performance has been supported by low operating costs and favourable commission income, but suggested that a prolonged downturn in the global oil market could lead to a reduction in capital spending by Energas’ parent company, Petronas.
