AM Best revises outlook to negative for Sveriges Ångfartygs Assurans Förening (the Swedish club)

AMSTERDAM–(BUSINESS WIRE)–AM Best revised the outlook from stable to negative and affirmed the financial strength rating of A- (Excellent) and the long-term credit rating of “a-” (Excellent) of Sveriges Ångfartygs Assurans Förening (The Swedish Club) (TSC or the Club) (Sweden).

The credit ratings (ratings) reflect the strength of TSC’s balance sheet, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate management of business risks.

The revision of the outlook to negative reflects continued pressure on operating performance as difficult market conditions continue to impact the Club’s underwriting results. The Club has taken action to address this underperformance, including announcing a general increase of 12.5% ​​in Protection and Indemnity (P&I) rates for the 2022/23 policy year. However, a negative rating action could occur if these measures prove insufficient to restore underwriting performance in the short to medium term.

TSC’s balance sheet strength is underpinned by risk-adjusted capitalization at the highest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Free reserves remained stable in 2020 but should have decreased in 2021 (official end-2021 figures not yet available). As a result, AM Best expects TSC’s BCAR for 2021 to decline, while still favoring the valuation of the higher tier. TSC maintains a good liquidity profile, with liquid assets representing 167% of net technical provisions at the end of 2020.

Historical performance has been moderately volatile, with earnings ranging from a profit of $18.5 million (2019) to a loss of $8.3 million (2018) over the period 2016-2020. In 2020, the Club recorded a technical loss of USD 31 million, resulting in a combined ratio of 123% (2019: 106%). The deterioration was driven by reported losses in the P&I business line, while the performance of the marine business line remained in line with the prior year. AM Best expects TSC to report another big technical loss for 2021, with a big impact from P&I pool claims. In addition, the performance of the marine sector is not expected to improve due to the impact of major claims, such as X-Press Pearl, for which the Club was the main hull underwriter. Underwriting losses should be partially offset by positive investment income.

TSC maintains a well-diversified portfolio in the marine insurance market, offering hull and machinery, and P&I cover types, and benefits from membership in the International Group of P&I Clubs. Gross written premium increased by 8% in 2020 and AM Best expects further premium growth to be reported for 2021 and into 2022, due to general club increases for the P&I segment.

This press release relates to credit ratings that have been published on AM Best’s website. For all rating information relating to the release and relevant disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit AM Best’s Recent Rating Activity webpage. For more information on the use and limitations of credit rating opinions, please see Best’s Guide to Credit Ratings. For more information on the proper use of Best’s Credit Scores, Best’s Preliminary Credit Scores, and AM Best’s press releases, please see Guide to the Proper Use of Best Scores and Ratings.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2022 by AM Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Comments are closed.