AM Best has affirmed the financial strength rating of ‘A’ (Excellent) and the long-term issuer credit rating of ‘a’ (Excellent) of INPEX Insurance (IIL), with the outlook of these credit ratings being classified as ‘stable’. The agency says these ratings reflect IIL’s ‘very strong’ balance sheet strength, in conjunction with its strong operating performance, neutral business profile, and appropriate enterprise risk management. Best’s capital adequacy ratio has assessed IIL’s risk-adjusted capitalisation as being at the strongest level, with the agency expecting it to remain there over the intermediate term. IIL’s balance sheet strength is supported by its low net underwriting leverage and a highly conservative and liquid investment portfolio, of which the captive plans to gradually distribute its accumulated surplus to its parent company, INPEX Corporation (INPEX), Best says. The agency emphasises that, despite this, IIL is expected to maintain sufficient capital to support its book of business, with the good credit quality of its reinsurance panel, including energy sector mutual insurance company Everen, potentially offsetting credit risks from its high reinsurance dependence. IIL has reported robust underwriting results over the last five years, reflected in its operating performance assessment, with an average combined ratio under 40 per cent and a return on equity of 6.4 per cent. Best says that, despite a decline in premium income in 2024, predominantly from the parent’s large-scale liquid natural gas project, the captive’s top line is set to remain stable in the medium term due to support from additional premiums from a variety of new projects. Due to IIL being a single-parent captive of Japan’s largest oil and gas exploration and production company, INPEX, it underwrites energy-related operation and construction risks, covering mainly property damage, third-party liability, and operator’s extra expenses for its parent group. Best adds that negative rating actions could occur if IIL’s operating performance weakens to a level below the current assessment, or if its credit profile — including operating profitability, financial leverage, and interest coverage levels — deteriorates significantly. Conversely, positive rating actions could occur if the captive demonstrates a sustained strengthening in its balance sheet metrics while consistently continuing to deliver strong underwriting results.
