AM Best has upgraded the financial strength rating to A- (excellent) from B++ (good) and the long-term issuer credit rating to “a-” (excellent) from “bbb+” (good) of Switzerland-domiciled Sigurd Rück AG. The outlook for the ratings is stable.
Sigurd is a captive reinsurer of Italian oil company Saipem S.p.A, and an important element of the group’s risk management framework.
AM Best expects Sigurd’s risk-adjusted capitalisation to remain comfortably at the strongest level, supported by moderate exposure to catastrophe losses and a comprehensive retrocession programme with retrocessionaires of superior credit quality.
The ratings reflect Sigurd’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 upgrade of the ratings reflect the stabilisation of Saipem’s credit fundamentals, which have improved over recent years because of the implementation of a strategic turnaround plan.
The plan was announced in 2022, immediately after Saipem had announced a material loss after tax and included a $2bn capital injection from its shareholders.
The captive is exposed to concentration and credit risk due to a cash-pooling agreement with the Saipem group, which acts as a partially offsetting factor in the assessment.
As of 31 December 2023, the funds that Sigurd allocated to the cash-pooling with Saipem represented 52.9% and 61.6% of its total assets and capital and surplus, which compares with 53.4% and 70.3% at year-end 2022.
Sigurd has a record of strong operating performance, evidenced by a five-year (2019-2023) weighted average return-on-equity and combined ratio of 11.1% and 66.1%.
The captive’s business profile assessment benefits from its role as an important risk management tool for its parent, along with geographic and product diversification derived from Saipem’s wide-ranging commercial activities.