23 June 2022Reinsurance

AM Best affirms ratings of Enel Insurance

AM Best has affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” (Excellent) of Enel Insurance (EINV), a captive of Enel, a multinational electric utility company based in Italy. The outlook of these credit ratings is stable.

The rating agency said that the ratings reflect EINV’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.

EINV’s balance sheet strength assessment is supported by its strongest level of risk-adjusted capitalisation, as measured by Best’s capital adequacy ratio. The captive benefits from a liquid investment portfolio and a low dependence on reinsurance. In 2021, €250m was injected into the captive to support its significantly higher retention levels under the parent’s new insurance programme. While EINV’s risk-adjusted capitalisation is expected to remain at the strongest level, the higher retention levels increase the potential for volatility.

EINV’s operating performance assessment reflects AM Best’s expectation that EINV’s prospective combined ratio will remain within the captive’s through-the-cycle target of between 95% and 100%. In 2021, EINV reported a net profit after tax of €15.8m, after making a loss of €3.5m in 2020. The improvement was driven both by better technical results, with combined ratios decreasing to 83.2% in 2021 (2020: 101.5%), and non-technical results, which benefited from foreign exchange gains of €3.7m.

AM Best added 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 strategic importance to the parent was confirmed with the significant capital injection and increase in net retention in 2021.