Phillips 66 captives affirmed by AM Best
AM Best has affirmed the financial strength rating of A and the long-term issuer credit ratings of “a” of Spirit Insurance Company and Radius Insurance Company.
The outlook of these ratings is stable.
AM Best said that the ratings reflect Spirit and Radius’ balance sheet strength, which the rating agency assesses as very strong, as well as each company’s adequate operating performance, neutral business profile and appropriate enterprise risk management.
Spirit and Radius each have the inherent benefits of financial flexibility and support as captive insurers for their ultimate parent, Phillips 66, with integrated operations, closely aligned and uniform interests, and are established core elements in its overall risk management program. The captives’ loss experience has remained generally favourable due to the parent’s strong loss control program and relatively small number of material catastrophe losses. Phillips 66 conducts periodic reviews of Spirit and Radius’ potential loss exposures through an industrial risks specialist, which demonstrates its commitment to safety.
The captives’ underwriting risks largely consist of onshore and limited offshore property and liability business. Spirit provides property damage, business interruption, construction all risks, excess liability and employee medical reimbursement insurance for Phillips 66, its affiliates and subsidiaries’ domestic US operations only; however, Spirit generally does not provide coverage for Texas-based risks. Radius provides similar coverage (i.e., property damage, business interruption, excess liability) to Phillips 66, its affiliate and subsidiaries’ non-US risks in which Phillips 66 has ownership interests. However, premium and exposures for Radius declined in 2022 after removing UK property exposures from the captive.
Spirit and Radius have exposure to low frequency, high severity loss claims due to the sizable limits offered on their respective policies, introducing potential significant dependence on reinsurance protection. Spirit also provides terrorism coverage to its parent. Though relatively high on a gross basis, terrorism exposure is heavily mitigated by reinsurance protection afforded by coverage under the federal Terrorism Risk Insurance Program Reauthorization Act, which expires in 2027.
