A.M. Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a+” of Solen Versicherungen AG (SVAG) (Switzerland) and Noble Assurance Company (Noble) (Texas).
The outlook of these credit ratings remains stable.
A.M. Best stated that these ratings reflect SVAG’s balance sheet strength, which was categorised as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The rating firm outlined that the rating factor in rating enhancement from SVAG’s ultimate parent, Royal Dutch Shell plc (Shell), reflecting SVAG’s importance as a group risk management tool. Shell provides support to SVAG in the form of a contingent capital facility that would allow SVAG to replenish its capital position quickly following a sequence of very large losses.
SVAG’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which improved from the very strong to the strongest level at year-end 2019, as measured by Best's Capital Adequacy Ratio (BCAR).
The improvement in risk-adjusted capitalisation reflected an increase in available capital in 2019, due to higher retained earnings and an increase in unrealised investment gains, according to A.M. Best.
It added that risk-adjusted capitalisation remains supported by good internal capital generation and a relatively stable risk profile while the balance sheet strength assessment takes into consideration the concentration of assets in intra-group deposits at year-end 2019.
A.M. Best noted that SVAG has a track record of strong operating performance, largely driven by robust underwriting results, as demonstrated by a five-year (2015 to 2019) weighted average combined ratio of 24.2 percent.
Prospective performance is subject to volatility from exposure to high severity, low-frequency losses, reflecting the type of business underwritten and the captive’s large net maximum line sizes, the rating firm explained.
SVAG does not purchase outward reinsurance cover for the majority of its risks. A.M. Best added that 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 reinsures life business emanating from the group’s pension liabilities.
A.M. Best suggested 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 percent of its risks to SVAG, its sister company, through a quota share reinsurance agreement.