AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Rembrandt Insurance Company, Ltd. (Rembrandt) (Bermuda), a captive (re)insurer of Vitol Holding B.V. (Vitol), a group engaged in the trading of energy-related products. The outlook of these Credit Ratings (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 (BCAR). 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, which represented approximately half of the captive’s total investments at year-end 2022. The risks associated with this loan are mitigated somewhat by its short duration and early repayment option, along with the sound financial condition of Vitol itself. In addition, Rembrandt maintains sufficient cash holdings to cover its stressed liquidity requirements.
Rembrandt’s strong operating performance is demonstrated by its five-year (2018-2022) weighted average return on equity of 24.2%, driven primarily by its excellent underwriting results, represented by a five-year weighted average combined ratio of 35.3% over the same period. Revenues and earnings benefitted from higher and more volatile oil and gas prices in 2022, with the company’s gross written premium nearly doubling during the year and after-tax profit increasing by 195%. Profitability is expected to moderate over the medium term, as oil and gas prices stabilise.
Rembrandt’s business profile assessment reflects its strategic importance to its parent. The captive is embedded within Vitol’s risk management framework; however, it covers only part of its parent’s insurance needs. Rembrandt has a concentrated insurance portfolio focused on the core operations of Vitol, with approximately 90% of its premiums derived from marine cargo and liability risks.
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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Romeo Berti, ACA, CMA
Senior Financial Analyst
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