AM Best has upgraded Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb+” (Good) from “bbb” (Good) and affirmed the Financial Strength Rating of B++ (Good) of Ikal Insurance Company AG (Ikal) (formerly Kot Insurance Company AG) (Switzerland). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Ikal’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. The ratings also reflect a rating drag due to the company’s association with its parent, Petroleos Mexicanos (PEMEX). Ikal is the captive reinsurer of PEMEX, Mexico’s state-owned oil and gas company.

The upgrade of the Long-Term ICR reflects improvements in PEMEX’s credit profile due to its parent, Mexico’s government, committing to a range of financial support measures for the group. PEMEX’s credit profile remains weaker than Ikal; however, the captive continues to benefit from the robust regulatory regime in Switzerland, with strict requirements for capital adequacy and corporate governance, which are expected to support Ikal’s prospective financial strength and independence.

Ikal’s balance sheet strength is underpinned by its risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects Ikal to maintain a buffer over the minimum requirement for the strongest BCAR assessment over the medium term; therefore, reflecting its strategy to maintain sufficient capital to absorb potential volatility stemming from its exposure to low frequency, high severity losses. A partially offsetting balance sheet strength factor is the captive’s dependence on retrocession coverage, driven by the large policy limits it offers to PEMEX. However, the associated credit risk is partly mitigated by a diversified retrocession panel and long-standing relationships with reinsurers of sound credit quality. In addition, Ikal is subject to the credit risk of its parent as the captive extends a large recurring loan to PEMEX, which is settled yearly.

Ikal has a track record of strong operating performance, generating a five-year (2020-2024) weighted average return-on-equity ratio of 11.0%. Results over the cycle have been underpinned by good underwriting performance, albeit subject to volatility, as demonstrated by a significant loss resulting in a combined ratio of 90.5% for 2024 (as calculated by AM Best). The captive reported a healthy five-year (2020-2024) weighted average combined ratio of 68.4%. Prospectively, AM Best will continue to monitor volatility in Ikal’s underwriting performance over the longer term, given its high net line sizes relative to its premium base.

Ikal remains well-integrated within PEMEX as its only reinsurance captive and is important to the group as a cost-effective risk management tool.

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.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2025 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: https://www.businesswire.com/news/home/20251205222754/en/