18 April 2018Analysis

AM Best gives 'Excellent' rating to Pfizer's Vermont captive

Ratings agency AM Best has affirmed the financial strength rating of A (Excellent) of Blue Whale Re, the Vermont-based captive of international pharmaceutical company Pfizer.

The outlook is stable, and the ratings reflect Blue Whale'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.

As Blue Whale insures or reinsures Pfizer's global property exposures, AM Best said it plays an important role in Pfizer's overall enterprise risk management and assumes a critical role in protecting the Pfizer enterprise's assets.

AM Best noted that Blue Whale's capitalisation is very strong, albeit reliant on the parent.

"It operates at conservative underwriting leverage levels; however, it provides coverages with extremely large limits, and its gross exposures per loss occurrence are elevated," explained AM Best. "Although Blue Whale benefits from reinsurance protection, its net retentions remain very substantial. Reinsurance is provided by a large panel of reinsurers, and Blue Whale relies on significant capacity to support its obligations. Therefore, it is heavily dependent on reinsurance. Nevertheless, AM Best recognizes the quality of the reinsurers, and the substantial financial resources and support available to the captive as part of the Pfizer group.

The ratings agency continued: "Due to the nature of the relationship between Blue Whale and Pfizer, changes in Pfizer’s credit risk can have certain impact on Blue Whale’s ratings as it is dependent on Pfizer’s ability to support its credit risk profile, competitiveness and risk management. The captive continues to be an integral component of Pfizer’s risk management platform. AM Best’s view of third-party credit ratings and market-based credit risk measures of Pfizer indicates stability, resulting in Blue Whale’s outlooks being stable."