2 October 2017Analysis

AM Best assigns rating to Saudi oil captive in Bermuda

Ratings agency AM Best has assigned a financial strength rating of A (Excellent) to Stellar Insurance, the Bermuda-based captive of Saudi Arabian Oil Company (Saudi Aramco), the state-owned oil company of Saudi Arabia.

The rating agency said that the outlook to these ratings is stable, and reflects Stellar's excellent risk-adjusted capitalisation, track record of very strong operating results and its strategic importance to Saudi Aramco as a risk management tool.

Stellar is a key part of Saudi Aramco's risk management framework, and its purpose is to provide financial risk transfer solutions for risk emanating from Saudi Aramco's operations.

The captive's business mix consists of energy onshore and offshore property, general liability risks, as well as associated business interruption cover.

According to AM Best, Saudi Aramco has strengthened Stellar’s capital position and enhanced its underwriting capacity by allowing the captive to retain all profits generated since its incorporation in 2001.

Capital requirements as per AM Best’s capital adequacy ratio are largely driven by investment risk, as Stellar holds a significant proportion of assets in funds of varying liquidity and duration. Furthermore, Stellar’s liquidity is enhanced with a credit facility provided by the parent.