Japanese trading company’s captive has rating affirmed

The captive insurer of one of Japan’s largest trading companies has had its A- financial strength rating affirmed by ratings agency AM Best. 

AM Best said the outlook for the rating of NEWGT Reinsurance Company was stable.

It said the ratings reflected NEWGT’s balance sheet strength, which AM Best assessed as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

Am Best said NEWGT’s balance sheet strength was well-supported by its risk-adjusted capitalisation and said the company’s capital base, despite paying a sizeable dividend to its parent, Itochu Corporation, in the fiscal year ended 31 March 2023, was expected to remain sufficient to support its underwriting portfolio over the medium term. 

“The company has a moderate level of reinsurance dependency; however, its exposure to potential credit risk is partially mitigated by a high-quality and well-diversified reinsurance panel,” AM Best said. 

It added that NEWGT’s operating performance had been consistently positive during the most recent five-year period. For the fiscal year ended March 31, 2023, the company recorded notable growth in both premium income and net profit. This was a result of a strong performance in ITOCHU's trading business, which was attributable to higher commodity prices and foreign exchange benefits from the depreciation of the Japanese yen during that period. 

“Notwithstanding the moderate volatility in the major lines of marine cargo business due to the impact of commodity price fluctuations, AM Best expects that NEWGT’s operating performance will remain profitable over the intermediate term given the company’s prudent underwriting practices and reinsurance programmes,” the agency said. 

It added that as a wholly owned subsidiary and captive insurer of one of Japan’s largest general trading companies, NEWGT provides reinsurance protection against group-related risks across various regions. 

“A majority of NEWGT’s business comes from Itochu-related marine business, and the remaining portfolio consists of a diverse mix of non-life business lines, including theft insurance, renters’ insurance, and group personal accident,” AM Best said. “NEWGT is well-integrated within the group with respect to risk management, corporate governance and internal control systems.”