LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Rating of “aa” of Intercona Re AG (Intercona) (Switzerland). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Intercona’s importance to Nestlé S.A. (Nestlé) and its high level of integration within the group’s risk management function. Furthermore, the ratings factor in Intercona’s strong risk-adjusted capitalisation, robust technical performance and its globally diversified business portfolio by line of business.
Intercona is a wholly owned captive reinsurer of Nestlé, a leading global food and beverage company. Intercona provides the first layer of reinsurance protection on the group’s global insurance programme. The captive benefits from Nestlé’s financial strength and is a key part of its parent’s overall risk management framework, assisting with the mitigation of risk exposures and loss prevention. Intercona enables Nestlé to optimise its insurance protection by scope and cost.
In 2016, Intercona reported its first technical loss in nearly 10 years, owing to an extraordinary weather-related event, which resulted in a combined ratio of 157% (2015: 83%). In spite of this, Intercona’s underwriting performance remained strong with a five-year average combined ratio of 95%, supported by its modest per risk exposure and aggregate underwriting limits.
To offset the impact of the underwriting loss, the company utilised CHF 53 million (approximately USD 55 million) from its fluctuation reserves held within capital and surplus to absorb the underwriting loss in 2016, which led to a decline in its risk-adjusted capitalisation. Nonetheless, A.M. Best expects the company’s risk-adjusted capitalisation to remain at a strong level in 2017, supported by the accumulation of significant equalisation and fluctuation reserves, and the retention of future profits as the company returns to a normalised claims experience.
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.
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