AM Best has affirmed the financial strength rating of ‘A’ (excellent) and the long-term issuer credit rating of ‘a’ (excellent) of Malaysia-domiciled Energas Insurance. The outlook for the ratings is negative.
Energas is a single parent captive owned by the national oil and gas company of Malaysia, Petroliam Nasional Berhad (Petronas).
The captive’s underwriting portfolio shows concentration by line of business and geography, with a significant focus on upstream and downstream energy risks located in Malaysia.
AM Best views Energas’ operating performance as strong, supported by its five-year average combined ratio of 68.4% (2018-2022).
The company’s net underwriting margins have benefitted from favourable reinsurance commission income and low management expenses relative to net earned premium.
Higher than expected frequency of large losses, accompanied by recent increases in its stop loss reinsurance programme’s aggregate retention level has led to increased volatility in its underwriting performance in recent years.
The AM Best ratings reflect Energas’ balance sheet strength, which are assessed as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
Energas’ balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which is expected to remain at the strongest level over the medium term.
Capital requirements arising from underwriting risks are viewed to be low given the company’s low net underwriting leverage, though the accumulation of high severity losses from multiple policies may lead to moderate balance sheet volatility.
An offsetting balance sheet strength factor is the company’s reliance on reinsurance to manage its exposure to accumulation and large single risks, but credit risk is partially mitigated using a good credit quality reinsurance panel.