30 July 2014

Moody's assigns first-time rating to CNPC Captive Insurance

Moody's Investors Service has assigned a first-time A1 insurance financial strength (IFS) rating of ‘stable’ to CNPC Captive Insurance Company Limited (CNPC Captive Insurance).

CNPC Captive Insurance was established in December 2013 as the first captive insurance company in China. The company is 51 percent-owned by China National Petroleum Corporation (CNPC, Aa3 stable), and 49 percent-owned by PetroChina Company Limited (PetroChina, unrated). PetroChina is then 86.51 percent-owned by CNPC.

CNPC is the largest oil & gas company in China, wholly owned by the Chinese government it is one of the largest state-owned enterprises directly supervised by the central state-owned assets supervision and administration commission of the State Council. PetroChina is the main operating arm of CNPC, engaged in exploration and production, refinery and chemical, pipeline and marketing businesses. The company is listed in Hong Kong, New York and Shanghai.

"The A1 IFS rating primarily reflects Moody's view that CNPC Captive Insurance's credit profile is highly correlated to that of CNPC," says Stella Ng, a Moody's assistant vice president and analyst.

In addition to benefiting from operational and financial support from CNPC, the rating reflects the insurer's integration with the risk management function of the group, providing insurance coverage for internal group risks. Currently, CNPC Captive Insurance co-insures affiliated risks with external insurance companies.

CNPC Captive Insurance also benefits from CNPC's strong financial flexibility.

"We expect the captive insurer's capitalization relative to its risk exposures to be strong in the coming 12-18 months, and for any future increases in its risk retention to be supported by CNPC," adds Ng.

Also, partially offsetting CNPC Captive Insurance's strengths are its limited external reinsurance protection and focus on property risk in the oil & gas sector, which is intrinsically volatile.