AM Best upgrades the Long-Term Issuer Credit Rating (Long-Term ICR) of Ikal Insurance Company AG (Ikal) to ‘bbb+’ (Good) from ‘bbb’ (Good). The rating agency affirms the Financial Strength Rating (FSR) of B++ (Good) for the company, with the outlook for these Credit Ratings remaining ‘stable’. The upgrade of the Long-Term ICR reflects improvements in the credit profile of Ikal’s parent, Petroleos Mexicanos (PEMEX), which is Mexico’s state-owned oil and gas company. The improvement is attributed to the Mexican government committing to a range of financial support measures for the group. Ikal, formerly Kot Insurance Company AG, is the captive reinsurer of PEMEX. Its ratings reflect its balance sheet strength, assessed as very strong, strong operating performance, neutral business profile, and appropriate enterprise risk management. The captive continues to benefit from the robust regulatory regime in Switzerland, which is expected to support its prospective financial strength and independence. Ikal's balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects Ikal to maintain a buffer over the minimum requirement for the strongest BCAR assessment over the medium term. A partially offsetting factor is the captive’s dependence on retrocession coverage, driven by the large policy limits it offers to PEMEX. Furthermore, Ikal is subject to the credit risk of its parent as it extends a large recurring loan to PEMEX, which is settled yearly. Ikal has a track record of strong operating performance, having generated a five-year (2020-2024) weighted average return-on-equity ratio of 11.0%. Results have been underpinned by good underwriting performance, although this is subject to volatility, demonstrated by a combined ratio of 90.5% for 2024 (as calculated by AM Best).
