AM Best downgrades Petronas captive
AM Best has downgraded the financial strength rating to A- from A and the long-term issuer credit rating to “a-” from “a” of ENERGAS Insurance. The outlook of these ratings has been revised to stable from negative.
The ratings reflect ENERGAS’ balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. In addition, the ratings factor in neutral impact from the parent company, Petroliam Nasional Berhad (Petronas), which is the national oil and gas company of Malaysia.
The rating downgrades reflect a trend of deterioration and increased volatility in ENERGAS’ operating performance in recent years, with higher-than-expected frequency of large losses resulting in large underwriting deficits for the company. Underwriting performance in 2025 remained negatively impacted by adverse loss experience, soft market conditions and reserve strengthening, although ongoing portfolio remediation measures are expected to support earnings recovery over the medium term. Investment performance remains as a robust positive contributor to overall earnings and is expected to remain as a key contributor to the company’s bottom line over the medium term.
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 be at least at the very strong level over the medium term. AM Best views ENERGAS’ investment portfolio as conservative, with a majority of investments allocated to cash and deposits, and the remainder invested in good quality government and corporate bonds. The company’s high reliance on reinsurance to manage its risk accumulation is an offsetting balance sheet factor, which makes it susceptible to changes in the availability and costs of reinsurance capacity.
AM Best assesses ENERGAS’ business profile as neutral. As a single-parent captive to Petronas, ENERGAS benefits from business access to the group’s insurance risks. However, the company’s underwriting portfolio shows concentration by line of business and geography, with a significant focus on upstream and downstream energy risks located in Malaysia.
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