Enel captive gets ratings affirmed by AM Best

Rating agency AM Best has affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” of Enel Insurance, a Dutch captive of Enel, a multinational electric utility company based in Italy.

AM Best said that the outlook of these credit ratings remains stable.

The ratings reflect EINV’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

According to the rating agency EINV’s balance sheet strength assessment is underpinned by the strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio. The captive maintains good liquidity, with investments composed almost entirely of fixed-income securities and cash funds. An offsetting rating factor is EINV’s high reliance on reinsurance, although the risks associated with this dependence are partially mitigated by the captive’s use of reinsurers of excellent credit quality.

In 2017, the captive generated an underwriting loss of approximately EUR 10 million, primarily driven by reserve strengthening on its property book. However, EINV’s underwriting performance over the past five years (2013-2017) compares positively with its targeted through-the-cycle combined ratio, and AM Best expects the captive to achieve near break-even underwriting results and a low-single digit return on equity in future years.

AM Best also said that as a single-parent captive, EINV is well-integrated within the Enel group and plays a fundamental role in managing the group’s risk exposures. The captive’s risk management capabilities are in line with its risk profile.