AM Best assigns ratings to Enel captive

AM Best has assigned a financial strength rating of A- and a long-term issuer credit rating of “a-” to Enel Erre (EE). 

EE is a captive of Enel, a multinational electric utility company based in Italy. The outlook assigned to these ratings is stable.

According to AM Best the ratings reflect EE’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

On 1 January 2024, Enel’s old captive, Enel Insurance, transferred its assets and liabilities to EE, through a cross-border merger. The aim of the transaction was to redomicile the captive operation of Enel to Italy, where the group is based. Going forward, EE will be the new captive insurer of the Enel group. Enel Insurance N.V. ceased to exist as a result of the cross-border merger. EE will be renamed Enel Reinsurance – Compagnia di riassicurazione S.p.A.

AM Best expects EE’s risk-adjusted capitalisation to be maintained with a comfortable buffer at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). According to AM Best the captive benefits from good liquidity and low reinsurance dependence. An offsetting rating factor is EE’s potential exposure to large losses given its high net retention per risk, which has the potential to introduce volatility in capitalisation levels.

EE’s operating performance assessment reflects AM Best’s expectations that prospective combined ratio will remain within the captive’s through-the-cycle target of between 95% and 100%. Solid investment income is expected to contribute positively to overall profitability.

As a single-parent captive, EE is well-integrated within the Enel group and plays a fundamental role in managing the group’s risk exposures, said AM Best, adding that EE has a developed ERM framework with clear risk appetite and tolerance levels in place.