AM Best Affirms Credit Ratings of Solen Versicherungen AG and Noble Assurance Company
AM Best has affirmed the Financial Strength Ratings of A (Excellent) and the Long-Term Issuer Credit Ratings of "a+" (Excellent) of Solen Versicherungen AG (SVAG) (Switzerland) and Noble Assurance Company (Noble) (Texas, U.S.). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect SVAG'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. In addition, the ratings factor in rating enhancement from SVAG's ultimate parent, Shell Plc (Shell), reflecting SVAG's importance to the group as a well-entrenched risk management tool. Shell provides support to SVAG in the form of a contingent capital facility that would allow SVAG to replenish its capital position in the event of a material decline in its risk-adjusted capitalisation.
SVAG's risk-adjusted capitalisation, as measured by Best's Capital Adequacy Ratio (BCAR), reduced to the very strong level at year-end 2021, following large natural catastrophe losses in 2021. However, AM Best expects SVAG to replenish its capital buffers during 2022 to support a strongest BCAR assessment, through organic capital generation underpinned by the full retention of strong earnings. The balance sheet strength assessment factors in the large gross and net line sizes offered by the captive, relative to its capital base. However, AM Best notes the captive's enhanced financial flexibility afforded by its ability to draw on its contingent capital facility provided by its immediate parent, Shell Petroleum N.V., should it be required.
SVAG has a track record of strong operating performance, primarily driven by robust underwriting results, as demonstrated by a five-year (2017-2021) weighted average combined ratio of 29%. Prospective operating performance is subject to potential volatility arising from the exposure to high-severity, low-frequency losses, in conjunction with the large net line sizes offered relative to the company's premium base. In addition, SVAG assumed responsibility for management of the Shell group's foreign currency warehousing activities during the second half of 2021, which expose the captive to elevated marke risk and have the potential to drive additional volatility in overall performance. Nonetheless, SVAG's key performance metrics are expected to remain supportive of a strong assessment.
SVAG's business profile assessment reflects its key role in supporting its ultimate parent's overall risk management framework, as Shell's principal captive. The captive's non-life business mostly consists of offshore and onshore property and liability risks, as well as the associated business interruption cover. SVAG also writes a small book of life business derived from reinsurance of the group's pension liabilities.
The ratings of Noble reflect its status as a member of the SVAG rating unit and a subsidiary of Shell. As a captive domiciled in Texas, Noble underwrites Shell's U.S. business and cedes 100% of its risks to SVAG, its sister company, through a quota share reinsurance agreement.
AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best's Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
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