3 July 2017Analysis

AM Best rates BP's captive insurer and reinsurer

Ratings agency AM Best has affirmed the financial rating of A- to the Vermont-based Saturn Insurance, a captive of global oil and gas company BP.

Furthermore, AM Best has also affirmed the FSR of A (Excellent) of Jupiter Insurance, a Guernsey-based captive of BP, and provider of reinsurance to its sister captive, Saturn Insurance.

The ratings reflects Saturn’s excellent risk-adjusted capitalisation and track record of good operating performances since its incorporation (2011). In addition, the ratings consider Saturn’s affiliation with and importance to its ultimate parent, BP.

The affirmation of Jupiter's ratings reflects its excellent risk-adjusted capitalisation, strong earnings track record and its importance to BP as a risk management tool. Offsetting rating factors include the captive’s high underwriting limits, as well as its concentrated investment portfolio, which predominantly consists of financial instruments linked to its ultimate parent, BP.

Jupiter’s underwritten risks consist largely of offshore and onshore property and business interruption cover. The captive enables BP to optimise its insurance protection in terms of scope and cost.

Saturn’s capital base has grown by 43 percent since 2011, with no dividends paid out in this period. AM Best expects Saturn to continue to manage its risk-adjusted capitalisation at a strong level, although a decline from the current excellent level is likely, taking into account increases in underwriting risk over the medium term from new lines of business.

Saturn writes large gross lines relative to the size of its capital base; however, reinsurance with its sister company, Jupiter Insurance, protects its balance sheet against large losses.