AMSTERDAM--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of SIAT-Società Italiana Assicurazioni e Riassicurazioni p.A. (SIAT) (Italy), a subsidiary of UnipolSai Assicurazioni S.p.A. (UnipolSai). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect SIAT’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
SIAT’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), deteriorated materially in 2018 due to a significant increase in reinsurance recoverables. However, BCAR is expected to return to the strongest level by year-end 2019 once a large gross claim is settled. AM Best does not expect the company to encounter any issues recovering from its reinsurers given its long-standing relationships and the credit quality of its reinsurance panel. Prospective capital adequacy also is expected to benefit from good internal capital generation.
The company maintains a strong liquidity profile, with liquid investments accounting for approximately 115% of its year-end 2018 net technical liabilities. Partially offsetting factors in the balance sheet strength assessment include the company’s investment concentration in Italian government bonds and its dependence on reinsurance to write high-value risks.
In 2018, SIAT’s pre-tax profits decreased to EUR 0.5 million from EUR 7.2 million in 2017, due to a significant deterioration in its claims experience. Prior to 2018, SIAT had a long track record of net underwriting profits, with combined ratios below 90% reported in each of the previous three years (2015-2017). Historically, volatility has been contained by an effective reinsurance programme. AM Best expects SIAT to achieve a return on equity in the high-single digits in 2019, supported by selective underwriting and moderate improvements in pricing for marine insurance lines.
SIAT has an established reputation as a niche insurer in the marine hull and cargo segments, where it ranks among the leading players in Italy. In addition, the company’s business profile is strengthened by its association with UnipolSai, a large Italian insurer. SIAT benefits from a developed ERM framework, with the risk function being centralised at the group level.
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