5 April 2019Analysis

Pharmaceutical company Pfizer captive gets Excellent rating

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

Blue Whale Re re/insures Pfizer’s global property exposures, and plays an important role in Pfizer’s overall ERM and assumes a critical role in protecting the Pfizer enterprise’s assets.

The outlook for Blue Whale's ratings 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 (ERM).

AM Best noted that while Blue Whale's capitalisation is very strong, it is reliant on its parent, Pfizer.

"[Blue Whale] operates at conservative underwriting leverage levels; however, it provides coverages with extremely large limits, and its gross exposures per loss occurrence are elevated. 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 depends heavily on reinsurance. Nevertheless, AM Best recognises 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 said.

Changes in Pfizer's credit risk can have certain impacts 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," said AM Best. "AM Best’s view of third-party credit ratings and Pfizer’s market-based credit risk measures indicate stability, resulting in Blue Whale’s outlooks being stable."

AM Best noted the company’s results rebounded in 2018, as the captive recovered from the impact of Hurricane Maria, which occurred in late 2017. Resolution of all Hurricane Maria-related claims is expected by mid-2019, after which time reserves are expected to return to historical levels.