Rating agency Standard & Poor’s has affirmed the ‘A’ rating of Norway-based marine insurer and mutual Skuld.
S&P said that Skuld had a strong reputation and a market position in the marine and P&I insurance (P&I) market, although, as was the case with its peers, it was relatively undiversified outside of its marine specialism. The club was said to be well-capitalized and likely to remain so across the next two years, although the P&I market was expected by S&P to remain challenging over the same period. “The club is likely to continue to report positive bottom-line results over the next two years. For the financial year 2021-2022, we expect the club will report an underwriting result close to breakeven, with an expectation that pool claims will remain at a heightened level. In FY2022-FY2023, the club is likely to return to underwriting profitability”.
S&P said that Skuld historically had recorded less volatility in results than its P&I club peers, but the club remained exposed to the volatility of other International Group (IG) clubs’ claims through the IG’s pooling system.
S&P’s assumptions included that the global economy would recover from the Covid-19 pandemic in 2021 as vaccination roll-out progressed across the globe. It expected G20 economies to bounce back with a growth rate of 6.4%. Investment returns were expected to remain muted due to continued low interest rates. S&P expects 10-year US government bond yields to improve to 1.7% this year. Claims from the IG reinsurance pooling system were expected to remain at the heightened level seen in the past three years.
Assuranceforeningen Skuld (Gjensidig)–Key Metrics
|S&P Global Ratings capital adequacy||Very strong||Very strong||Excellent||Excellent||Excellent||Very strong|
|Net income $m||~15||~10||24.6||25.5||10.7||57.5|
|Return on shareholders’ equity (%)||~3||~2||5.3||5.6||2.4||13.9|
|P/C: net combined ratio (%)||99.0||101.0||108.7||110.3||97.7||98.4|
S&P observed that Skuld’s regulatory capital position was a healthy 184% for the overall group at year-end 2021, based on the standard formula. The club benefited from about $130m of ancillary own funds,” reflecting its ability to make unbudgeted calls on its mutual members. S&P does not give credit for this in its capital model, but it does influence its choice of the higher ‘a’ anchor.