LONDON--(BUSINESS WIRE)--A.M. Best has assigned a financial strength rating of A+ (Superior) and the issuer credit rating of “aa-” to Solen Versicherungen AG (SVAG) (Switzerland). The outlook assigned to both ratings is stable.
The ratings reflect the importance of the captive insurer as a risk management tool to its ultimate parent company, Royal Dutch Shell plc (RDS), and its subsidiaries. In addition, the ratings reflect SVAG’s excellent earnings track-record and strong risk-adjusted capitalisation. An offsetting factor is the captive’s very large gross and net maximum line size. SVAG does not purchase outward reinsurance cover for the majority of its risks.
SVAG’s risk-adjusted capitalisation is likely to remain strong into 2015, supported by high retention of earnings. The captive has a strong performance record, largely driven by its excellent underwriting results, demonstrated by a five-year average combined ratio of 42% (unconsolidated). However, prospective performance may be volatile, given the type of business underwritten and the captive’s large gross and net maximum line size.
The captive’s large maximum line size is an offsetting factor for the ratings, as one or more large losses in a year could have a material impact on risk-adjusted capitalisation. However, a contingent capital facility is in place, which partly mitigates this offsetting factor.
The captive is a key part of, and well integrated into, the parent’s overall risk management framework. SVAG’s non-life risks consist largely of offshore and onshore property and liability business and associated business interruption cover. In addition, life business emanating from the group’s pension book is written. SVAG has a fully owned Bermudian subsidiary, Solen Insurance Limited (SIL), which writes internal reinsurance.
SVAG’s non-life risks consist largely of offshore and onshore property and liability business and associated business interruption cover. In addition, life business emanating from the group’s pension book is written. SVAG has a fully owned Bermudian subsidiary, Solen Insurance Limited (SIL), which writes internal reinsurance.
SVAG is well positioned at its current rating level. Negative rating actions could follow a prolonged period of weak underwriting results, as well as material deterioration in either SVAG’s or RDS’s financial strength.
A.M. 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.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilised:
- Alternative Risk Transfer (ART)
- Analyzing Contingent Capital Facilities
- Catastrophe Analysis in A.M. Best Ratings
- Rating Members of Insurance Groups
- Evaluating Non-Insurance Ultimate Parents
- Risk Management and the Rating Process for Insurance Companies
- Understanding Universal BCAR
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