AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of S2C S.p.A. Compagnia di Assicurazioni di Crediti e Cauzioni (S2C) (Italy). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect S2C’s balance sheet strength, which AM Best assesses as adequate, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).

S2C’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), was at the strongest level at year-end 2023. AM Best expects the company’s risk-adjusted capitalisation to remain at the same level prospectively. Offsetting factors in the balance sheet strength assessment include the company’s limited financial flexibility, its material exposure to Italian government bonds and real estate investments, as well as its small capital base, which increases the potential for volatility in its risk-adjusted capitalisation. Dependence on reinsurance is high, although this is mitigated somewhat by the company’s long-standing relationships with reinsurers of excellent credit quality.

S2C has a strong track record of underwriting performance, as demonstrated by a five-year weighted average combined ratio of 56.9% (2019-2023), as calculated by AM Best. In 2023, the combined ratio improved to 51.5% (2022: 54.6%), as calculated by AM Best, thanks to a favorable claims’ experience during the year. AM Best notes that prospective performance may be volatile due to movements in the supplementary unearned premium reserve (required by local regulation) and the potential for fluctuations in loss experience from the company’s surety business.

S2C is a niche mono-line insurer that focuses on the highly competitive surety market in Italy. The company leverages its specialist expertise to compete against larger players and maintains sustainable premium rates. S2C has a developed ERM framework, with clear risk appetite and tolerance levels in place.

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