Financial Strength Rating of COSCO SHIPPING Captive Insurance
AM Best Affirms Credit Ratings of COSCO SHIPPING Captive Insurance
AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) for COSCO SHIPPING Captive Insurance Co., Ltd. This affirmation reflects a stable outlook for the ratings.
Understanding the Financial Strength of COSCO SHIPPING Captive
The ratings signify COSCO SHIPPING Captive’s strong balance sheet strength. AM Best categorizes this as very strong, paired with adequate operating performance. Additionally, the ratings reflect a neutral business profile and effective enterprise risk management practices.
Strategic Importance and Support
COSCO SHIPPING Captive is recognized as a strategically crucial entity within its parent company, China COSCO SHIPPING Corporation Limited. The support received in various domains such as business development, risk management, and capital provision from COSCO SHIPPING enhances the capabilities of the captive insurer.
Consistent Capital Management
The risk-adjusted capitalization of COSCO SHIPPING Captive has consistently been recorded at the strongest levels, as indicated by AM Best's Capital Adequacy Ratio (BCAR). The strength of the company’s balance sheet is evidenced by very low underwriting leverage combined with a prudent reinsurance program.
Stable Growth in Capital and Surplus
Over the years, COSCO SHIPPING Captive has seen a steady growth rate in capital and surplus, maintaining low- to mid-single digit increases. While the dividend payout ratio saw an uptick recently, it is anticipated to stabilize, ensuring a robust capital buffer through continued profit accumulation.
Diversification in Investments
To enhance investment outcomes, COSCO SHIPPING Captive has gradually diversified its portfolios over the past five years. This strategy included an increase in fixed-income investments and equities, focusing on creating a more stable and liquid investment environment while managing asset risks efficiently.
Performance Metrics Over the Years
Since 2017, COSCO SHIPPING Captive has maintained a net profit each year, showcasing an average return-on-equity ratio of 5.0% from 2019 to 2023. The underwriting performance has benefited notably from low distribution costs associated with group-related business, coupled with favorable reinsurance commission income, despite facing minor net loss experiences due to a small net earned premium base.
Business Focus Areas
The underwriting portfolio of COSCO SHIPPING Captive predominantly comprises marine hull business linked to its parent group and affiliates. This area is anticipated to remain the principal source of premium income in the foreseeable future.
Potential Risks and Future Outlook
Future negative rating actions could manifest if there is a significant divergence in the operating performance of COSCO SHIPPING Captive relative to its business plan. Other factors contributing to negative rating actions include diminished support from COSCO SHIPPING or adverse changes in COSCO SHIPPING's financial health.
Commitment to Stable Growth
Despite potential volatility risks centered on high-severity and low-frequency product risk profiles, COSCO SHIPPING Captive is committed to executing its business plan effectively. By focusing on stable premium growth, the company aims to uphold its favorable bottom line.
Frequently Asked Questions
What is the current financial strength rating of COSCO SHIPPING Captive?
AM Best has affirmed COSCO SHIPPING Captive’s Financial Strength Rating at A (Excellent), reflecting a stable outlook.
How has COSCO SHIPPING Captive performed financially?
COSCO SHIPPING Captive has maintained profitability since 2017, showing an average return-on-equity ratio of 5.0% over the past five years.
What role does COSCO SHIPPING play in supporting its captive insurance?
COSCO SHIPPING serves as a significant source of support, offering assistance in areas including business growth, risk management, and capital initiatives.
What types of insurance does COSCO SHIPPING Captive underwrite?
The underwriting portfolio primarily includes marine hull insurance, along with liability, commercial property, and cargo insurance.
How is COSCO SHIPPING Captive addressing investment risks?
The company is diversifying its investment portfolio, increasing exposure to fixed-income assets and equities while managing asset risk at an appropriate level.
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