14 October 2018Analysis

AM Best upgrades ConocoPhillips’ Vermont captive

Ratings agency AM Best has ugpraded the financial strength rating of A (Excellent) of Sooner Insurance Company, the Vermont-based captive of multinational energy company ConocoPhillips.

Sooner’s underwriting risks consist largely of providing property damage, business interruption and general liability coverage to ConocoPhillips and its subsidiaries, including joint ventures worldwide.

The ratings reflect Sooner’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).

The upgrade also reflected consistent capital and surplus growth, supported by strong operating results.

The balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), consistently favorable loss reserve development and low underwriting leverage.

AM Best notes that although the majority of Sooner’s capital is loaned to its ultimate parent, ConocoPhillips, it is considered to have relatively low risk due to this affiliation, as well as the parent’s strong balance sheet and history of positive earnings.

Over the past 10 years, Sooner’s strong operating performance has been consistent, with most return metrics outperforming the industry composite and modest investment returns.

Sooner’s loss experience has remained favourable for over a decade, which AM Best said is due in part to strong risk management programmes at ConocoPhillips, whose management views Sooner as a core element in its overall corporate risk management programme.