LONDON--(BUSINESS WIRE)--A.M. Best revised the outlook for the issuer credit rating (ICR) to positive from stable and affirmed the financial strength rating (FSR) of A (Excellent) and ICR of “a” of Jupiter Insurance Limited (Jupiter) (Guernsey). Jupiter is a captive of BP p.l.c. (BP), an integrated global oil and gas company. The outlook for the FSR is stable.
The revised outlook reflects Jupiter’s continued excellent underwriting performance and strong risk-adjusted capitalisation. These positive rating factors are partially offset by Jupiter’s high level of risk retention, as well as its concentrated investment portfolio, which primarily contains financial instruments linked to its parent, BP.
Jupiter continued to achieve an excellent underwriting performance in 2013 due to the absence of large losses. In 2013, the company reported a technical profit of USD 1,770 million versus USD 1,924 million in 2012.
Jupiter is expected to maintain its strong risk-adjusted capitalisation in 2014, supported by a large absolute capital base of USD 7,500 million as of year-end 2013. The company’s risk-adjusted capitalisation also benefits from low underwriting volatility in recent years, demonstrated by a stable five-year average loss ratio below 15%. Despite Jupiter’s high underwriting limit of USD 1,500 million and the absence of reinsurance protection, the company’s capital base is capable of absorbing a small number of major claims.
A partly offsetting factor remains Jupiter’s investments in two discount notes issued by BP International Limited with durations of three months and 30 days, respectively. A.M. Best considers the company’s investment concentration to be high and, in turn, regards the financial strength of Jupiter inextricably linked to that of BP. Jupiter’s investments in the respective discount notes, USD 7,942 million in 2013, result in an asset concentration of 98%.
Upward rating movements are likely to emanate from a sustained strengthening of the group’s overall enterprise risk management, which would be reflected by a sound safety track record. In addition, excellent levels of risk-adjusted capitalisation and consistently strong operating performance would be a prerequisite requirement for positive rating actions.
Negative rating pressure may arise from a material deterioration of Jupiter’s risk-adjusted capitalisation. A significant increase in the company’s retention levels of Jupiter’s main business lines without a commensurate increase in the capital base would likely lead to a review of Jupiter’s ratings.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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This rating announcement has been issued by A.M. Best Europe – Rating Services Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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