A.M. Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a+” (Excellent) of Solen Versicherungen AG (SVAG) (Switzerland) and Noble Assurance Company (Noble), located in Texas.
The ratings reflect SVAG’s balance sheet strength, which A.M. Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
In addition, the ratings factor in rating enhancement from SVAG’s ultimate parent, Royal Dutch Shell, reflecting SVAG’s importance to the group as a well-entrenched risk management tool.
Shell provides support to SVAG in the form of a contingent capital facility that A.M. Best says would allow SVAG to replenish its capital position quickly if needed.
SVAG’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which remained at the strongest level at year-end 2020, as measured by Best's Capital Adequacy Ratio (BCAR).
A.M. Best notes that risk-adjusted capitalisation could be materially impacted by one or more significant losses due to the large gross and net line sizes the captive offers.
However, A.M. Best says it expects SVAG to replenish capital buffers promptly following such losses, either through internal capital generation or by drawing on its contingent capital facility.
The balance sheet strength assessment also takes into consideration the company’s significant, albeit decreasing, concentration of assets in intra-group deposits at year-end 2020.
A.M. Best explains: “SVAG has a track record of strong operating performance, largely driven by robust underwriting results, as demonstrated by a five-year (2016 to 2020) weighted average combined ratio of 19.8 per cent.”
Prospective performance is subject to potential volatility from exposure to high severity, low frequency losses, reflecting the type of business underwritten. SVAG does not currently purchase outward reinsurance cover for the majority of its risks.
“The expected transfer of some of the Shell group’s foreign currency warehousing activities into SVAG in 2021 is likely to introduce additional volatility going forward. Nonetheless, SVAG’s key performance metrics are expected to remain supportive of a strong assessment,” A.M Best notes.
SVAG’s business profile assessment reflects its key role in its ultimate parent’s overall risk management framework, as Shell’s principal captive.
The captive’s non-life business largely consists of offshore and onshore property and liability risks, as well as the associated business interruption cover. SVAG also writes a small book of life business emanating from the group’s pension liabilities.
A.M. Best outlines that the ratings of Noble reflect its status as a member of the SVAG rating unit and a subsidiary of Shell.
As a captive domiciled in Texas, Noble underwrites Shell’s US business and cedes 100 per cent of its risks to SVAG, its sister company, through a quota share reinsurance agreement.
