24 July 2019Analysis

AM Best affirms ratings for BP captives

AM Best has affirmed the financial strength rating of A (excellent) for Jupiter Insurance, and of A- (excellent) for Saturn Insurance, both captives of the oil and gas company BP.

AM Best also affirmed their long-term issuer credit ratings of a for Jupiter, and a- for Saturn.

The rating agency described Jupiter’s balance sheet as very strong, with strong operating performance, a neutral business profile and appropriate enterprise risk management. Its balance sheet strength is supported by its risk-adjusted capitalisation being at the strongest level, it added.

Jupiter’s risk-adjusted capitalisation is expected to remain at the strongest level, supported by strong internal capital generation. A capital base of approximately $6.5 billion at year-end 2018 supports the captive’s high maximum line size of $1.5 billion.

Meanwhile Saturn’s balance sheet was described as strong, with adequate operating performance, a limited business profile and appropriate enterprise risk management. The ratings also consider rating lift from Jupiter, which is Saturn’s reinsurer. Its risk-adjusted capitalisation was also given the strongest categorisation.

AM Best noted Saturn writes large gross lines relative to the size of its capital base, but added that 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,” said the rating agency.