AM Best affirms ratings of Saipem’s captive Sigurd Rück

AM Best has affirmed the financial strength rating of B++ (Good) of Sigurd Rück (Switzerland), a captive reinsurer of Saipem and a key element of the group’s risk management framework. The outlook of these ratings (ratings) is stable.

The ratings reflect Sigurd’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management. The ratings also factor, in the form of drag, Sigurd’s association with its parent company, Saipem. Sigurd is a captive reinsurer of Saipem and a key element of the group’s risk management framework.

Sigurd’s very strong balance sheet strength assessment is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects Sigurd’s risk-adjusted capitalisation to remain at the strongest level, supported by the captive’s conservative reserving policies, its moderate exposure to catastrophe losses and its comprehensive retrocession programme with well-rated retrocessionaires.

Sigurd has a material exposure to credit risk driven by a cash-pooling agreement with the Saipem group, which acts as a partially offsetting factor in the assessment. As of 31 December 2022, the funds Sigurd allocated to the cash-pooling with Saipem represented 47.7% and 70.3% of the company’s total assets and capital and surplus, respectively, down from 59.8% and 78.6% in 2021.

Sigurd has a record of strong operating performance, evidenced by a five-year (2018-2022) weighted average return-on-equity and combined ratio of 10.4% and 67.8%, respectively (as calculated by AM Best). Profitability has been supported by a low and stable expense ratio and a good, albeit volatile, loss ratio. While operating profitability declined in 2022 as a result of a large claim incurred during the year, with the company’s combined ratio increasing to 97.7%, profitability is expected to remain strong prospectively.

Sigurd’s business profile benefits from geographic and product diversification derived from Saipem’s wide-ranging commercial activities.