AM Best has upgraded the financial strength rating to A (Excellent) from A- (Excellent) and the long-term issuer credit rating to “a” (Excellent) from “a-” (Excellent) of Inpex Insurance, the Bermudian-based captive insurer.

The outlook of these credit ratings has been revised to stable from positive.

The agency said the ratings reflected IIL’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

It said the rating upgrades were a reflection of IIL’s consistently robust operating performance metrics.

The company has exhibited favourable trends in its premium volume, while simultaneously maintaining a high level of profitability, with an average combined ratio below 30 per cent over the past five years (fiscal 2018 to 2022).

The company’s premium income showed notable growth in recent years mainly through a large-scale liquefied natural gas project led by its parent company, Inpex Corporation, the largest oil and gas exploration and production company in Japan.

Prospectively, while IIL’s underwriting risk will increase as it plays a bigger role in Inpex’s risk management system, AM Best expects the positive trends in the company’s underwriting performance to continue, with a much larger net premium base and stable profitability bolstered by a favourable claims experience and low-cost structure.

The agency said IIL’s balance sheet strength was well-supported by its risk-adjusted capitalisation, which was assessed at the strongest level, as measured by Best’s capital adequacy ratio.

The company’s total capital also was strengthened to $269 million as of December 31, 2022, from $109 million as of December 31, 2021, following a capital injection of $150 million from Inpex with the aim of expanding IIL’s underwriting capacity.

In its role as a single-parent captive of Inpex, IIL mainly participates in energy operational risks of which the coverage mainly encompasses property damage, third-party liability and operator’s extra expenses.

Recently, AM Best said, it cautiously ventured into underwriting oil and gas construction risk for the main operator project and operational risks of selected offshore wind projects.

Although there is some product/geographic concentration, AM Best expects that such concentration can be partially mitigated as Inpex continues to expand its global footprint and IIL underwrites new risks.