AM Best has affirmed the financial Strength Ratings of A (Excellent) and the long-term issuer credit ratings of “a+” (Excellent) of Switzerland-domiciled Solen Versicherungen AG (SVAG) and Texas-domiciled Noble Assurance Company. The ratings outlook is stable.
The ratings agency said SVAG’s business profile assessment reflects its 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.
As a captive domiciled in Texas, Noble underwrites Shell’s US business and cedes 100% of its risks to SVAG, its sister company, through a quota share reinsurance agreement.
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.
The ratings of Noble reflect its status as a member of the SVAG rating unit and a subsidiary of Shell.
SVAG’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which recovered from the very strong level at year-end 2021 to the strongest level at year-end 2022, as measured by AM Best’s capital adequacy ratio (BCAR).
The improvement in risk-adjusted capitalisation was supported by organic capital generation arising from the full retention of earnings in 2022.
The balance sheet strength assessment also factors in a concentration of assets in intragroup investments and the large gross and net line sizes offered by the captive, relative to its capital base.
However, AM Best expects capital to be managed to a level that is sufficient to absorb a series of large losses, in line with the captive’s capital management strategy.
AM Best said SVAG has a track record of strong operating performance, underpinned by robust underwriting results, as demonstrated by a five-year (2018-2022) weighted average combined ratio of 27%.
Prospective operating performance is subject to potential volatility due to the captive’s exposure to high-severity, low-frequency losses, given its large net line sizes relative to its premium base.
The captive is also exposed to elevated market risk through its management of the Shell group’s foreign currency warehousing activities, which drives a level of variability in overall earnings.