Petroleum group captive has ratings affirmed
AM Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” (Excellent) of Bermudian-based Rembrandt Insurance Company Ltd.
Rembrandt is a captive re/insurer of Vitol Holding BV, a group engaged in the trading of petroleum-related products.
The outlook of these credit ratings is stable.
The ratings reflect Rembrandt’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
Rembrandt’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s capital adequacy ratio.
AM Best expects Rembrandt’s risk-adjusted capitalisation to remain comfortably at the strongest level, supported by low net underwriting leverage, an outward reinsurance programme that is placed with a panel of financially strong reinsurers and excellent internal capital generation.
Partly offsetting factors in the balance sheet strength assessment include the captive’s moderate reliance on reinsurance and its concentrated asset base, with a loan provided by Rembrandt to Vitol that represented approximately half of the captive’s total investments at year-end 2021.
The risks associated with this loan are mitigated somewhat by terms that allow it to be redeemed at short notice, along with the good financial condition of Vitol itself. In addition, Rembrandt maintains sufficient cash holdings to cover its net claims provisions.
AM Best said Rembrandt’s strong operating performance was demonstrated by its five-year weighted average return on equity of 16.3 per cent (2017-2021) and was driven primarily by its good underwriting results, with a five-year weighted average combined ratio of 44.5 per cent over the same period. Operating results are further supported by stable, albeit modest, investment returns.
Rembrandt’s business profile assessment reflects its strategic importance to its parent, as an embedded part of Vitol’s risk management framework; however, the captive covers only a small part of the parent’s insurance needs, writing around 25 per cent of total insurance premiums.
Rembrandt has a concentrated insurance portfolio, with approximately 90 per cent of its premiums derived from marine cargo and liability risks.