Lufthansa merged two of its captives last year, creating what is now known as Delvag Versicherungs.
The ratings reflect Delvag’s “strong” risk-adjusted capitalisation following the merger and its track record of "solid" operating performance as both entities pre-merger.
Offsetting the ratings affirmation is the captive’s dependence on reinsurance to protect the Lufthansa fleet business. However, A.M. Best suggested that the associated credit risk is mitigated by the use of a financially “strong and diverse” reinsurance panel.
A.M. Best predicted that the captive’s risk-adjusted capitalisation will remain strong, supported by its equalisation reserve and silent net reserves, and reflecting its moderate risk profile.
According to the rating agency, a profit and loss absorption agreement with Lufthansa provides balance sheet protection, but limits the captive’s accumulation of earnings.
The ratings also consider Delvag’s robust earnings, which are underpinned by strong technical performance.
A.M. Best expects disciplined underwriting and a comprehensive reinsurance programme to support good prospective performance.