A.M. Best has affirmed the financial strength rating of “A (Excellent)” and the long-term issuer credit of “a” of Eni Insurance Designated Activity Company (EID), a captive of Eni, a multinational oil and gas company based in Italy.
The ratings reflect EID’s strong risk-adjusted capitalisation, robust underwriting performance and strategic importance as a risk management tool to Eni.
EID’s risk-adjusted capitalisation was strong at year-end 2016, although it deteriorated from the previous year mainly due to an increase in reserve and credit risks following a large loss reported in December 2016.
A.M. Best expects the captive’s risk-adjusted capitalisation to strengthen in throughout this year and 2018, supported by the expected settlement of the large loss and good internal capital generation.
According to A.M. Best, an offsetting rating factor is EID’s exposure to peripheral European sovereign bonds, which accounted for approximately 30 percent of its fixed income portfolio in 2016.
In addition, the captive’s reliance on reinsurance to write large risks has been exacerbated further by a material increase in its gross maximum line size for 2017. However, credit risk is mitigated partly by the excellent credit quality of EID’s reinsurance panel.
EID has a track record of robust underwriting performance, evidenced by a five-year average combined ratio of approximately 60 percent. In 2016, the captive reported technical profits of €12 million, despite underwriting performance being affected negatively by the large loss.
Looking ahead, A.M. Best expects EID to achieve strong underwriting results, with a combined ratio below 60 percent in most years, along with modest investment profits.
