AM Best affirms JP Morgan’s captive rating

Rating agency AM Best has affirmed its financial strength rating of A (Excellent) and long-term issuer credit rating of “a” (Excellent) for Park Assurance Company, the Vermont captive of financial services giant JP Morgan. The credit ratings are stable.

According to AM Best, Park benefits from a very strong balance sheet, strong operating performance, limited business profile and appropriate enterprise risk management.

Its risk-adjusted capitalisation is at the strongest level, measured by Best’s capital adequacy ratio (BCAR). This reflects its conservative loss reserving practices and favourable development trends, as well as a conservative investment portfolio and strong liquidity measures.

“Park is well-capitalised through retained earnings, as the captive has reported consistently favourable pure loss ratios in combination with its low-cost underwriting expense structure to produce favourable operating earnings year after year, which have outperformed the commercial property composite by a wide margin,” the analysts write. 

The ratings also reflect Park’s “sophisticated risk management strategy and practices, experienced management team and its integral role as a single-parent captive of JPMorgan Chase Holdings”, it adds.

Offsetting these factors were the potential credit risk associated with Park’s “extensive use of reinsurance”, used to mitigate exposure in substantially valued insured locations, and a reliance on the protection afforded by the Terrorism Risk Insurance Program Reauthorization Act.

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