HONG KONG, 20 September 2019 – AM Best has affirmed stable Credit Ratings, through the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of COSCO SHIPPING Captive Insurance Co., Ltd. (COSCO SHIPPING Captive) (China).
COSCO SHIPPING Captive’s balance sheet strength is mirrored through its strong ratings, satisfactory operating performance, neutral business profile and proper enterprise risk management. The ratings also reflect the extensive support the company has gained from its parent; China COSCO SHIPPING Corporation Limited (Cosco SHIPPING),
As measured by Best’s Capital Adequacy Ratio (BCAR), COSCO SHIPPING Captive’s risk-adjusted capitalization remained at its strongest in 2018, and is supported by very low underwriting leverage, a prudent reinsurance program and a conservative investment portfolio. The captive insurer’s capital and surplus at year-end 2018 amounted to RMB 2.2 billion (USD 311 million), due to large initial injection of RMB 2 billion (USD 283 million) in start-up capital.
Since its inception in February 2017, the company has generated net operating profits each year contributing to organic growth in its capital and surplus. AM Best expects continued net profits from the company over the medium term, supported by its positive underwriting results and a stable stream of investment income.
During fiscal year 2018, COSCO SHIPPING Captive achieved RMB 432 million (USD 61 million) in premium income, mostly derived from marine hull, its main line of business, which is predicted to remain as the company’s key revenue source over the medium term. The captive receives numerous implicit and explicit support from its parent including business development, researching funding, managerial and capital support as a strategically important member of COSCO SHIPPING.
As a result of offsetting rating factors which includes the captive’s small net premium base due to its high reinsurance dependency, as well as a high-severity, low-frequency product risk profile, the captive is subjected to potential volatility in its underwriting results.