AM Best has affirmed the financial strength rating of ‘A’ (excellent) and the long-term issuer credit rating of “a” (excellent) of Barbados-domiciled ICM Assurance (ICMA).
ICMA is a single parent captive, wholly owned by CNOOC International, which is in turn wholly-owned by CNOOC Limited (CNOOC), the ultimate parent. The outlook of the credit ratings is stable.
CNOOC Limited is one of China’s largest producers of offshore crude oil and natural gas.
The captive provides global liability and property coverages to its ultimate parent and affiliates.
ICMA is considered a core element of CNOOC’s overall risk management and risk mitigation programme and serves a “critical role” in delivering coverage and access to reinsurance.
The ratings reflect ICMA’s balance sheet strength, which is assessed as strongest, as well as its adequate operating performance, neutral business profile, and appropriate enterprise risk management (ERM).
The ratings incorporate AM Best’s view of ICMA’s exposures diversified globally among countries with predictable or developing legal, business and regulatory environments.
AM Best expects ICMA’s level of risk-adjusted capitalisation, as measured by Best’s capital adequacy ratio (BCAR), to remain at a similar level prospectively.
The balance sheet strength assessment considers ICMA’s low underwriting leverage and liquidity measures.
ICMA’s surplus consists of capital and underwriting profits retained in the captive and loaned back to the parent.
The loan is repayable on demand with counterparty risk curbed due to the affiliation and the aligned interests of the two companies.
The captive’s gross loss potential is elevated as it remains exposed to high severity events, due to the nature of the insurance ICMA provides for CNOOC’s oil and gas exploration.
This risk is partially offset by safety programmes and loss control provided by CNOOC, while reinsurance protection is placed to limit the captive’s net exposure.
ICMA has reported solid operating results, aggregating significant net operating profits recorded over the past five years.
“The captive’s loss experience remains favourable due to infrequent material catastrophic events, management’s knowledge of the business and strong loss control programs at parent level,” AM Best said.