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 Sigurd Rück AG (Sigurd) (Switzerland). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Sigurd’s balance sheet strength, which A.M. Best categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM). In addition, the ratings factor in rating drag due to the weaker credit profile of its parent company, Saipem S.p.A. (Saipem).
Sigurd is a captive reinsurer of Saipem, an Italian multinational group that provides services to the oil and gas sector, including procurement, construction and installation of pipelines, as well as drilling.
A.M. Best expects Sigurd’s risk-adjusted capitalisation to be maintained at the strongest level, underpinned by internal capital generation. Other rating factors supporting A.M. Best’s assessment of balance sheet strength include the captive’s conservative investment and reserving policies, its moderate exposure to catastrophe losses and a comprehensive retrocession programme. A partly offsetting rating factor is Sigurd’s relatively small capital base, which exposes its risk-adjusted capitalisation to a degree of volatility. In addition, a cash pooling agreement in place with the Saipem group creates concentration risk within Sigurd’s asset portfolio.
Sigurd has a strong operating track record, demonstrated by an average five-year return on equity of 20% (2012-2016). Profitability has been driven by the underwriting account, which has produced a five-year average combined ratio of 53% (2016: 58%). Although prospective performance is likely to deteriorate, due to decreasing premium rates and challenging market conditions affecting the Saipem group, A.M. Best expects the captive to maintain a strong level of profitability.
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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