10 July 2017Analysis

AM Best rates Shell’s Switzerland and Texas captives

Ratings agency AM Best has affirmed the financial strength ratings of A (Excellent) of Switzerland-based Solen Versicherungen (SVAG) and Texas-based Noble Assurance Company, both captives of Royal Dutch Shell.

The rating agency said that the ratings reflect the affiliation of SVAG with its ultimate parent, Shell, to which it remains important as a risk management tool.

Furthermore, the ratings reflect SVAG’s excellent earnings track record and very strong risk-adjusted capitalisation.

Noble writes Shell’s US business and cedes 100 percent of its risks to SVAG through a quota share reinsurance agreement.

The ratings agency expects SVAG’s risk-adjusted capitalisation to remain very strong, supported by internal capital generation. The captive has an excellent performance track record, largely driven by robust underwriting results, as demonstrated by a five-year average combined ratio of 41 percent.

Prospective performance remains subject to volatility from high severity, low frequency losses, reflecting the type of business underwritten and the captive’s large gross and net maximum line size. The captive does not purchase outward reinsurance cover for the majority of its risks.

AM Best commented: “Due to the large gross and net maximum line size, one or more large losses in a year could have a material impact on SVAG’s risk-adjusted capitalisation. However, AM Best expects that SVAG would be able to quickly replenish capital following such losses either through retention of earnings or by drawing on its contingent capital facility.”

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