AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of INPEX Insurance, Ltd. (IIL) (Bermuda). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect IIL’s 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.

IIL’s risk-adjusted capitalisation is assessed at the strongest level, as measured by Best’s Capital Adequacy ratio (BCAR). AM Best expects it to remain at the strongest level over the intermediate term. The company’s balance sheet strength is supported by its low net underwriting leverage and a highly conservative and liquid investment portfolio. IIL plans to distribute gradually its accumulated surplus to the parent company, INPEX Corporation (INPEX). Despite this, the company is expected to maintain a sufficient capital buffer to support its book of business. Additionally, IIL's potential credit risks from its high reinsurance dependence for underwriting large risks are partially mitigated by the good credit quality of its reinsurance panel including Everen Limited (Everen), a dedicated energy sector- mutual insurance company of which INPEX became a member in 2023.

IIL’s operating performance assessment reflects its robust underwriting results over the last five years with an average combined ratio of less than 40% and an average return on equity of 6.4%. Despite a moderate decline in premium income in 2024, mainly from the parent’s large-scale LNG project, AM Best expects IIL’s top line to remain stable over the medium term supported by additional premiums from various new projects. The company delivered strong underwriting profits in 2024, despite incurring additional expenses from the accrual of theoretical withdrawal premium for the Everen membership. IIL’s investment income also remained strong in 2024, driven by expanded asset size and improved yields of U.S. dollar-denominated deposits.

IIL is a single-parent captive of INPEX, which is the largest oil and gas exploration and production company in Japan. IIL underwrites energy-related operational and construction risks of which the coverage mainly encompasses property damage, third-party liability and operator’s extra expenses for its parent group. Although there is some product/geographic concentration, AM Best expects that the company’s business will become increasingly diversified following INPEX’s expanding global footprint and IIL’s plan to underwrite new risks.

Negative rating actions could occur if IIL’s operating performance deteriorates to a level no longer supportive of the current assessment. In addition, any significant deterioration in INPEX’s credit profile, including its operating profitability, financial leverage and interest coverage levels, could lead to downward pressure on the ratings of IIL. Positive rating actions could occur if IIL demonstrates sustained improvement in its balance sheet strength metrics, while consistently delivering strong underwriting results.

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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