AM Best affirms ratings of Spirit & Radius

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.

According to the rating agency the ratings reflect Spirit’s and Radius’ balance sheet strength, which AM Best 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 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 establishment as core elements in its overall risk management program.

AM Best said that the captives’ loss experience has remained generally favourable due to the parent’s strong loss control program and to a relatively small number of material catastrophe losses. Phillips 66 conducts periodic reviews of Spirit’s and Radius’ potential loss exposures through an industrial risks specialist.

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 to 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.

“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,” said AM Best in a statement. “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 federal TRIPRA (Terrorism Risk Insurance Program Reauthorisation Act) coverage, which expires in 2027.”