AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Jupiter Insurance Limited (Jupiter) (Guernsey), a captive of BP p.l.c. (BP), an integrated global oil and gas company. The outlook of the Credit Ratings (ratings) remains stable.
The ratings reflect Jupiter’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
Jupiter’s balance sheet strength is supported by its risk-adjusted capitalisation being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Offsetting rating factors include the captive’s high underwriting limits provided to a number of different locations and facilities, as well as its concentrated investment portfolio, which predominantly consists of financial instruments linked to BP, its ultimate parent.
AM Best expects Jupiter’s risk-adjusted capitalisation to remain at the strongest level, supported by strong internal capital generation. A capital base of approximately USD 6.5 billion at year-end 2018 supports the captive’s high maximum line size of USD 1.5 billion. The captive does not purchase any outward reinsurance cover. Jupiter’s investments are highly concentrated, with 98% accounted for by discount notes issued by BP International Limited, with durations of between one and 12 months. Consequently, AM Best considers Jupiter’s financial strength to be linked closely to that of BP.
The captive has reported strong operating results over the past five years, mainly driven by strong underwriting profits in the absence of large losses. However, soft market conditions, lower insured values due to BP’s divestments and lower oil prices have put significant downward pressure on Jupiter’s premium income.
Jupiter’s business profile assessment reflects its key role in BP’s overall risk management framework, as its principal captive. Jupiter’s underwritten risks consist largely of offshore and onshore property and business interruption cover. The captive allows BP to optimise its insurance protection in terms of scope and cost. In addition, Jupiter provides reinsurance to its sister captive, Saturn Insurance Inc.
AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Saturn Insurance Inc. (Saturn) (Burlington, VT). Saturn is a captive of BP p.l.c. (BP), an integrated global oil and gas company. The outlook of the Credit Ratings (ratings) remains stable.
The ratings reflect Saturn’s balance sheet strength, which AM Best categorises as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also consider rating lift from Saturn’s reinsurer, Jupiter Insurance Limited (Jupiter), which is the principal captive of the BP group and provides substantial reinsurance support to Saturn.
Saturn’s balance sheet strength is supported by its risk-adjusted capitalisation categorised as strongest, as measured by Best’s Capital Adequacy Ratio (BCAR). Saturn writes large gross lines relative to the size of its capital base. However, reinsurance protects its balance sheet against high severity, low frequency losses. Offsetting rating factors continue to be the captive’s high reinsurance dependence and relatively small capital base, which exposes the risk-adjusted capitalisation to potential volatility following large losses.
Saturn benefits from low investment risk, with approximately half of its assets invested in cash and cash equivalents. The remainder of the portfolio is composed of callable short-term loans to a BP affiliate, with excellent liquidity terms.
Saturn recorded solid operating results in the 2014–2018 period, as demonstrated by a five-year weighted average return on equity of 7.1%, which was achieved despite a large workers’ compensation claim that negatively impacted its performance in 2017. The claim also demonstrates the exposure of the captive’s performance to volatility, which is an offsetting rating factor. Saturn’s track record of strong performance and full retention of earnings have supported growth in capital and surplus of 51% since the company’s incorporation in 2011.
Saturn’s business profile is assessed as limited, reflecting its small and concentrated portfolio of high-risk business emanating from the BP group in the United States. Saturn’s portfolio consists primarily of terrorism cover, certificate of financial responsibility, workers’ compensation insurance and environmental protection agency cover. The soft rate environment over the past four years has led to a decline in the captive’s gross written premiums, by approximately 60% since 2014.
来源：A.M.Best
