OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of “a” of Palms Insurance Company, Limited (Palms) (George Town, Cayman Islands). The outlook for both ratings remains stable.
The ratings reflect Palms' excellent risk-adjusted capitalization, history of consistently strong operating performance and conservative balance sheet strategies, as well as the captive's strong integration within the risk management structure of its parent, NextEra Energy Capital Holdings, Inc. (NEECH). The ratings also recognize Palms’ history of maintaining sufficient capital and financial resources to support its ongoing obligations.
Partially offsetting these positive rating factors are Palms' limited market scope and high net loss potential stemming from a single, severe occurrence relative to surplus. Nevertheless, this is somewhat mitigated by the company’s excellent loss history, favorable geographic spread of risk and the history of support of Palms’ strong surplus position by its parent. Additionally, while Palms depends on third parties for processing, servicing and administration, the senior management of its ultimate parent, NextEra Energy, Inc. (NEE) [NYSE: NEE], is closely involved in these operations.
Palms is a single parent or pure captive insurer wholly owned by NEECH, which in turn is wholly owned by NEE. Palms accepts insurance risks only from NEE and its affiliates, providing specialized direct and assumed property and casualty coverages: workers' compensation, automobile liability, employers’ liability and property risk. Although Palms participates in a range of coverages for very large risks, these risks are underwritten with tight guidelines and significant loss control measures by the insured affiliates as evidenced by a favorable loss ratio of less than 40% over the past five years.
A.M. Best believes that Palms is well-positioned at its current rating levels, and the ratings are not expected to be upgraded or their outlook revised in the near term. Nonetheless, key rating factors that could lead to negative rating actions include a significant and sustained decline in Palms' risk-adjusted capitalization, net operating performance results that do not meet A.M. Best’s expectations or a material deviation from its risk profile that could potentially undermine the stability of the ratings. In addition, financial issues resulting in rating pressure on NEECH and/or NEE could impact Palms' ratings.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and 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.
Key insurance criteria reports utilized:
• Alternative Risk Transfer (ART)
• Catastrophe Analysis in A.M. Best Ratings
• Evaluating Country Risk
• Evaluating Non-Insurance Ultimate Parents
• Risk Management and the Rating Process for Insurance Companies
• The Treatment of Terrorism Risk in the Rating Evaluation
• Understanding BCAR for Property/Casualty Insurers
• Understanding Universal BCAR
This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.
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