LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Delvag Versicherungs-AG (Delvag) (Germany). The outlook of these Credit Ratings (ratings) remains stable.
Delvag is the captive insurer for Deutsche Lufthansa Aktiengesellschaft (Lufthansa), a global aviation group domiciled in Germany. In October 2016, Delvag Luftfahrtversicherungs-AG merged with its subsidiary, Delvag Rueckversicherungs-AG (Delvag Rueck). The merger was retroactively enforced as of 1 January 2016. Concurrently, the merged entity changed its name to Delvag Versicherungs-AG from Delvag Luftfahrtversicherungs-AG.
The rating affirmations reflect Delvag’s strong risk-adjusted capitalisation following the merger and its track record of solid operating performance at both entities pre-merger. The ratings also consider Delvag’s role as the insurance captive of Lufthansa, its ultimate parent. A partly offsetting rating factor is Delvag’s dependence on reinsurance to protect the Lufthansa fleet business. However, the associated credit risk is mitigated by the use of a financially strong and diverse reinsurance panel.
A.M. Best expects Delvag’s risk-adjusted capitalisation to remain strong, supported by its equalisation reserve and silent net reserves, and reflecting its moderate risk profile. A profit and loss absorption agreement with Lufthansa provides balance sheet protection but limits the captive’s accumulation of earnings.
The ratings also consider Delvag’s robust earnings, which are underpinned by strong technical performance. A.M. Best expects disciplined underwriting and a comprehensive reinsurance programme to support good prospective performance. Additionally, the captive is expected to benefit from good investment returns (2016: net investment return including gains of 9.7%).
Delvag’s profile is enhanced by its strategic importance to and integration within the Lufthansa group. It continues to leverage its expertise in the aviation and transport sectors to write a book of third-party business alongside its core Lufthansa fleet portfolio.
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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