AM Best Affirms Japan P&I Credit Ratings As Excellent

KUALA LUMPUR, Jan 19 (Bernama) -- Global credit rating agency, AM Best has affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” (Excellent) of The Japan Ship Owners’ Mutual Protection & Indemnity Association (Japan P&I), with a stable outlook.

According to AM Best in a statement, these credit ratings (ratings) reflect Japan P&I’s very strong balance sheet strength, supported by adequate operating performance, a neutral business profile and appropriate enterprise risk management (ERM).

The association’s risk-adjusted capitalisation is assessed at the strongest level under Best’s Capital Adequacy Ratio. However, AM Best noted that capitalisation remains susceptible to potential volatility from large claims due to Japan P&I’s relatively small capital base.

This risk is partly mitigated by the Japan P&I’s ability to levy additional calls on members, as evidenced by an unbudgeted supplementary call in the fiscal year ended March 2023 (FY2022).

Japan P&I maintains a conservative and liquid investment portfolio, mainly comprising cash and high-quality fixed-income securities. While the association has a moderately high reliance on reinsurance for large risks, credit risk is partially mitigated through pooling arrangements and joint reinsurance programmes under the International Group of P&I Clubs (IG Clubs).

AM Best said Japan P&I’s operating performance over the past five years has been broadly in line with the global protection and indemnity (P&I) segment, which is inherently volatile. For the fiscal years FY2020 to FY2024, the association recorded an average return on equity of 10.4 per cent and a combined ratio of 99.2 per cent.

In FY2024, Japan P&I’s net profit declined moderately from the previous year, which had benefited from sizeable foreign exchange gains. However, underwriting performance improved notably due to lower claims from its own members, despite higher pool claims from other IG Clubs.

Japan P&I is one of 12 members of the IG Clubs and holds a dominant position in Japan’s P&I market, supported by long-standing relationships with shipowners. The association also benefits from a developed ERM framework and continues to place strong emphasis on loss prevention initiatives.

-- BERNAMA