S&P Global Ratings has raised its long-term counterparty credit and financial strength ratings on Aviabel Cie. Belge d’Assurances Aviation to “A” from “A-“, following the completion of its acquisition on April 1 by AXIS Capital.
Confirming a stable outlook for Aviabel, S&P also removed its ratings from CreditWatch, where it had placed them with positive implications on Dec. 6, 2016.
S&P said it raised Aviabel’s ratings because it is now “part of a larger group with diverse product offerings and geographic spread,” which will strengthen Aviabel’s credit quality.
“This transaction fits into AXIS’ growth and diversification strategy since it will increase its reach in the global aviation sector,” S&P said, noting that AXIS’ aviation and aerospace insurance totaled more than $50 million and contributed 1 percent of the group’s gross written premium in 2016.
As a result of the Aviabel acquisition, AXIS’ aviation business turnover will double, S&P confirmed.
“Thanks to its long presence in the industry and its technical capabilities, Aviabel has developed strong know-how and a sound reputation in the general aviation market, both in its traditional home market of Belgium, the Netherlands, and Luxembourg and internationally,” said S&P.
S&P noted that Aviabel will continue to use its brand name, which is a strong asset, “even though it will start communicating on its new ownership structure via a co-branding strategy.”
AXIS will protect Aviabel with strong internal reinsurance agreements, as it does for its other Europe-based subsidiaries, S&P said, explaining that this coverage will complement Aviabel’s current external reinsurance program.
“Aviabel’s reliance on aviation business makes it more sensitive to the currently difficult operating environment, characterized by continuous excess capacity, which has contributed to downward pressure on pricing,” S&P continued.
As a result of the transaction, however, S&P expected Aviabel’s competitive position to benefit from the “group’s larger balance sheet, strong reputation in markets where it operates, wider business and geographic diversification and economies of scale. We also foresee benefits to risk management and reserving as Aviabel is integrated into AXIS.”
Source: S&P Global Ratings
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