In 2015, the profitability of most property insurers declined due to market competition and major claim payouts, but the situation for captive insurers was somewhat different.
According to the 2015 annual information disclosure reports, CNPC Captive Insurance saw considerable growth in both insurance business revenue and net profit.
China Railway Property Insurance Captive was established in early July 2015. Within five months, China Railway Property Insurance Captive achieved insurance business revenue of RMB 16.097 million and a net profit of RMB 12.3501 million.
A Hong Kong-based insurance analyst at an investment institution told reporters that, overall, since both captive insurers were established not long ago and are still in the early stages of business expansion following their parent companies' capital injections, they are characterised by relatively high solvency adequacy ratios. As their operating history lengthens, the role of their capital can be further unleashed.
CNPC Captive Insurance, which has been operating for more than two years, outperformed most property insurance market players in underwriting profitability. In 2015, the company's top five insurance lines by premium income generated a combined underwriting profit of RMB 25.7062 million.
Among them, only liability insurance recorded an underwriting loss. In 2015, the company's liability insurance claim payments reached RMB 2.4415 million, with outstanding claims reserves of RMB 130 million and a loss of RMB 7.0242 million.
According to data from the Hong Kong Office of the Commissioner of Insurance, other captive entities of domestic parent companies registered in Hong Kong also performed well in underwriting in 2015.
Sinopec Insurance, established at the end of 2013, achieved net premiums of HK$133.327 million in 2015, an increase of nearly 2.42-fold over its 2014 net premiums of HK$39.077 million.
CGN Insurance, which officially commenced operations in March 2015, recorded net premiums of HK$42.063 million in 2015, with a profit of about HK$40.262 million.
The only exception was CNOOC Insurance, registered in Hong Kong back in 2000: its 2015 net premiums were HK$473.823 million, down 0.28% from 2014, and its profit was roughly HK$80.716 million, down about 25.36% from the 2014 profit of HK$108.139 million. This is related to the business downturn of its parent company CNOOC in 2015 amid depressed international oil prices; however, compared with the parent company's total operating revenue (down 30.33%) and total profit (down 57.12%), CNOOC Insurance's 2015 performance was still relatively good.
For parent companies, one important reason for establishing a captive insurer is to underwrite risks that the commercial market cannot cover. Accessing reinsurance is an important function of a captive insurer. The aforementioned head of CNPC Captive Insurance said that after acting for the first time as lead underwriter for five master-policy lines in 2015, the company carried out business cooperation with 54 reinsurance companies and formed three reinsurance treaties covering energy, non-marine and crude oil cargo risks.