AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of 'a-' (Excellent) of Gaviota Re S.A. (Gaviota) (Luxembourg).

The outlook of these Credit Ratings (ratings) is stable.

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

Gaviota operates as a single-parent captive of Repsol, S.A. (Repsol), a Spanish multi-energy company engaged in worldwide upstream, downstream and low carbon generation activities.

Gaviota's balance sheet strength is underpinned by its risk-adjusted capitalisation comfortably above the threshold for the strongest assessment, as measured by Best's Capital Adequacy Ratio (BCAR), and is expected to remain at this level. An offsetting factor in the balance sheet strength assessment is Gaviota's high level of reinsurance dependence, which is mitigated partially by its long-standing relationships with reinsurers of excellent credit quality.

Gaviota is exposed to credit risk driven by inter-company loans with Repsol, which also acts as a partially offsetting factor in the assessment. As of 31 December 2024, the funds Gaviota allocated to the inter-company loans with Repsol represented 54% of the company's total assets.

Gaviota has a track record of adequate operating performance, evidenced by a five-year (2020-2024) weighted average return on equity of 5.3%, as calculated by AM Best. In 2024, Gaviota reported after-tax profits of EUR 58.7 million (as calculated by AM Best, before movements in equalisation reserves), which are supported by a strong underwriting performance and robust investment results due to favourable market conditions. Prospective performance is subject to volatility due to potential large losses arising from Gaviota's property business. However, underwriting volatility should be moderated by the captive's comprehensive retrocession programme.

Gaviota is a key part of Repsol's risk management framework, providing mainly property and liability cover for the group's activities. Although the company's business portfolio is concentrated by product, with the majority of premiums accounting for property risks, the book is well-diversified by geography, reflecting the international scope of the parent's operations.

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 (BCR), Best's Performance Assessments (PA), Best's Preliminary Credit Assessments (PCA) 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 specializing 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.

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