AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” (Good) of Shanghai Electric Insurance Limited (SEIL) (Hong Kong). The outlook of these Credit Ratings (ratings) is stable. Concurrently, AM Best has withdrawn these ratings as the company has requested to no longer participate in AM Best’s interactive rating process.

The ratings reflect SEIL’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

SEIL’s balance sheet strength is assessed at the very strong level, reflecting its robust capitalisation level, low net underwriting leverage and conservative investment strategy. The company’s risk-adjusted capitalisation is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), based on year end 2022 audited results, and projected to remain stable through 2026. The company has appropriate reinsurance arrangements with prudent net retention levels.

SEIL’s operating performance remains adequate, despite the high volatility in its top line over the past few years. In 2023, SEIL ceased underwriting first set equipment insurance due to a change in a government subsidy scheme. The subsidy scheme was halted by government in 2021, resumed in 2022, and once again stopped in 2023. Investment income was the key contributor of SEIL’s operating profit in 2023, while the underwriting margin was thin. Going forward, the company plans to exit the first set equipment insurance segment and seek growth in overseas group risks. AM Best expects that a successful execution of this business plan may stabilise SEIL’s portfolio and operating performance. Investment income will remain the driver of net profit over the medium term.

SEIL is the sole captive insurer of Shanghai Electric Holding Group Co., Ltd., a leading industrial equipment manufacturer in mainland China. SEIL is the eighth captive insurer owned by a mainland China enterprise. The captive serves as the group’s insurance management platform and risk management tool; its major lines of business include property, engineering and liability.

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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