AM Best affirms FSA of captive COSCO SHIPPING

AM Best said the ratings reflect COSCO SHIPPING Captive’s 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.

The ratings also reflect the wide range of support the company receives from its parent, China COSCO SHIPPING Corporation, which AM Best perceives to benefit from strong government support.

COSCO SHIPPING Captive’s risk-adjusted capitalisation remained at the strongest level in 2021, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s balance sheet strength is assessed as very strong, underpinned by a very low underwriting leverage and a prudent reinsurance programme.

Since inception in 2017, the company’s capital and surplus has consistently grown at low- to mid-single digit rates, supported by partial earnings retention. Since 2019, the company has gradually shifted its investments toward debt and equities, away from a conservative risk appetite focused solely on cash and cash equivalents. The company’s investment portfolio remains liquid with asset risk managed at an appropriate level. AM Best expects the company’s risk-adjusted capitalisation to remain sufficient to support business growth over the short to intermediate term.

It added that COSCO SHIPPING Captive has demonstrated good execution of its business plan over the past few years. As the company was established in 2017, it faces pricing and reserving risks due to its lack of operating history. The company manages these risks through prudent underwriting practices, conservative actuarial assumptions and robust reinsurance programmes.

Negative rating actions could occur if there is a reduced level of support from COSCO SHIPPING or a significant deterioration in COSCO SHIPPING’s financial strength or credit profile. Negative rating actions also could occur if there is a material decline in the captive’s risk-adjusted capitalisation, or if there is a significant adverse deviation in the captive’s operating performance from its business plan.