A.M. Best has affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” of Sigurd Rück (Sigurd), based in Switzerland. The outlook of these credit ratings is stable. The ratings reflect Sigurd’s balance sheet strength, which is categorised as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings also consider Sigurd’s association with its parent company Saipem. Sigurd is the captive reinsurer of Saipem, which is a company in engineering, drilling and construction of major projects in the energy and infrastructure sectors that has a presence in over 60 countries. Sigurd’s very strong balance sheet strength assessment is underpinned by risk-adjusted capitalisation at the strongest level, according to Best’s Capital Adequacy Ratio (BCAR). A.M. Best said it expects Sigurd’s risk-adjusted capitalisation to remain at the strongest level, supported by the captive’s conservative investment and reserving policies, its moderate exposure to catastrophe losses and its comprehensive retrocession programme with a well-rated panel of retrocessionaires. But, the rating firm explained that an offsetting factor is a cash pooling agreement in place with the Saipem group, which exposes the captive’s balance sheet to increased concentration and credit risk. “The captive’s robust earnings have been driven by a low and stable expense ratio and a good, but volatile, loss ratio,” said A.M. Best. Despite its combined ratio increasing to 71.5 percent in 2019 (2018: 49 percent), as a result of two relatively large claims incurred during that year, Sigurd’s operating performance remains comfortably in line with a strong assessment, underpinned by a five-year (2015 to 2019) average return-on-equity and combined ratio of 13.4 percent and 56.1 percent, respectively. A.M. Best predicted that Sapiem’s operating performance will improve in 2020 and remain supportive of a strong assessment prospectively.
