AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Delvag Versicherungs-AG (Delvag) (Germany). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Delvag’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

Delvag is the captive insurer for Deutsche Lufthansa Aktiengesellschaft (Lufthansa), a global aviation group domiciled in Germany.

The captive’s balance sheet strength is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which remained at the strongest level at year-end 2023. AM Best expects the captive’s prospective risk-adjusted capitalisation to be maintained at the strongest level further supported by a profit and loss absorption agreement with Lufthansa, which provides Delvag with added balance sheet protection. The balance sheet strength assessment also factors in Delvag’s conservative and prudent reserving practices, as well as its good liquidity profile. A partly offsetting rating factor is Delvag’s moderately high dependence on reinsurance to protect its aviation fleet business. However, the associated credit risk is mitigated by the use of a financially strong and diverse reinsurance panel.

Delvag has a good historical earnings track record, as demonstrated by a five-year weighted average operating ratio of 65% (2019-2023), as calculated by AM Best, supported by a good balance of underwriting and investment incomes during most years. Delvag recorded a contraction in its technical performance in 2023, due to reserve build-ups in Incurred But Not Reported (IBNR) loss reserves. As a result, the combined ratio for 2023 stands at 102% as calculated by AM Best, above the five-year weighted average combined ratio of 88% (2019-2023). The company has undertaken remedial actions since 2020, on underperforming lines of business and partial discontinuation of non-group-related reinsurance business.

Delvag’s profile is enhanced by its strategic importance to and integration within the Lufthansa group. It continues to leverage its expertise in the aviation and transport sectors to write a book of third-party business alongside its core Lufthansa portfolio.

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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