AM Best Affirms Credit Ratings of Energas Insurance (L) Limited

SINGAPORE--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Energas Insurance (L) Limited (Energas) (Malaysia). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Energas’ 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. The ratings also factor a neutral impact from the parent of the company, Petroliam Nasional Berhad (Petronas), which is the national oil and gas company of Malaysia.

The company’s risk-adjusted capitalisation remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by Energas’ low underwriting leverage and conservative investment strategy. Investment assets consist mostly of cash and deposits held at well-established domestic financial institutions, as well as investment-grade debt securities. However, an offsetting balance sheet strength factor is Energas’ exposure to high severity loss events given the company’s concentration to energy risks. This is partly managed through the company’s low net premium retention and comprehensive reinsurance programmes, which are placed with a panel of reinsurers of high credit quality.

Energas has demonstrated a track record of strong operating performance, as evidenced by favourable five-year average combined ratio of 66% (2017-2021). Despite the company’s history of volatile loss ratios, the company’s management expense ratio has been consistently low, while robust reinsurance commission income has offset acquisition costs and contributed significantly to underwriting profits. The company’s operating performance remains supported by its investment income; however, in 2021, the company reported a decline in investment return largely driven by the low interest rate environment in Malaysia.

As a single-parent captive to Petronas, Energas benefits from direct access to and in-depth knowledge of the group’s insurance risks, which have supported the company’s underwriting capability. Nevertheless, the company’s portfolio is concentrated heavily by line of business and geography, with a significant focus on large energy risks in Malaysia.

Energas’ risk management capabilities are considered to be aligned with the company’s key risk profiles. The company’s risk management framework is highly integrated into the group’s risk management framework.

AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated 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.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

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