ICM Assurance (ICMA) has had its financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” by A.M. Best.
The outlook of the Barbados-based captive’s ratings is stable.
ICMA is a single-parent captive insurer of CNOOC International, which is wholly owned by Chinese oil company CNOOC.
The captive’s ratings are reflective of its balance sheet strength, categorised as “strongest”, in addition to its adequate operating performance, neutral business profile, and appropriate enterprise risk management.
The balance sheet strength is supported by its risk-adjusted capitalisation being at the strongest level, generally favourable trend of earnings, good liquidity, and low underwriting leverage.
Due to the nature of the insurance provided for oil and gas exploration, which is subject to high severity losses, ICMA has a high gross loss potential.
This high gross loss potential and the captive’s significant dependence on reinsurance is viewed by A.M. Best as an offsetting element.
ICMA’s net exposure to shock loss events is limited by the extensive reinsurance protection placed with a panel of financially strong reinsurers.
The captive has loaned a significant percentage of assets to its parent, which are very liquid and repayable on demand so there is limited counterparty risk due to the affiliation of the two companies.
The captive has generally reported adequate operating result, and favourable operating performance has been good in the most recent five years, however, underwriting results are volatile and susceptible to occasional outsized losses.
A.M. Best noted that this was evident in 2016 when underwriting losses eroded the company’s capital and surplus by 5 percent ($21 million).
ICMA’s loss experience has remained favourable partially due to no material catastrophe events, its inherent knowledge of the business written and the strong loss control programmes adopted at the parent level.
The captive’s risk management team conducts periodic reviews of its potential loss exposures through an industrial risks specialist.
The fundamental role ICMA plays as a single-parent captive and the implied support provided by ultimate parent, whose management incorporates ICMA as a core element of CNOOC’s overall risk management safety and risk mitigation programmes, is considered in its business profile assessment.
According to A.M. Best, sustaining a trend of stable earnings is a challenge for ICMA, despite its diversified business platform, due to the nature of the business it writes.
