OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” of ICM Assurance Ltd (ICMA) (St. Michael, Barbados). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect ICMA’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
ICMA is a single-parent captive insurer, wholly owned by CNOOC International Limited, which is in turn wholly owned by CNOOC Limited (CNOOC) [ADR-traded NYSE: CEO], ultimate parent.
The balance sheet strength is underpinned by its risk-adjusted capitalization being at the strongest level, as measured by Best Capital Adequacy Ratio (BCAR), generally favorable trend of earnings, good liquidity and low underwriting leverage. ICMA’s high gross loss potential due to the nature of the insurance provided for oil and gas exploration, which is subject to high severity losses, is viewed as an offsetting element to the balance sheet strength assessment, along with its significant dependence on reinsurance. This is tempered partially by the extensive loss control and group-wide safety programs provided by its ultimate parent, which help mitigate losses arising from its parent’s ordinary course of business. Extensive reinsurance protection, placed with a panel of financially strong reinsurers, limits ICMA’s net exposure to shock loss events. Also noteworthy is the significant percentage of assets that ICMA has loaned to its parent. These investments are very liquid and repayable on demand so there is limited counterparty risk due to the affiliation of the two companies.
ICMA has generally reported adequate operating results. While favorable operating performance has been good in the most recent five years, underwriting results are volatile and susceptible to occasional outsized losses. This was evident in 2016 when underwriting losses eroded the company’s capital and surplus by USD 21 million or 5%. The captive’s loss experience has remained favorable due in part to no material catastrophe events, its inherent knowledge of the business written and the strong loss control programs adopted at the parent level. The risk management team conducts periodic reviews of ICMA’s potential loss exposures through an industrial risks specialist.
The business profile assessment considers ICMA’s fundamental role as a single-parent captive and the implied support provided by its ultimate parent, whose management incorporates ICMA as a core element of CNOOC’s overall risk management safety and risk mitigation programs. A.M. Best notes that despite its diversified business platform, sustaining a trend of stable earnings is a challenge for ICMA due to the nature of the business it writes.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and 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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