LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Jupiter Insurance Limited (Jupiter) (Guernsey), a captive of BP p.l.c. (BP). The outlook of these Credit Ratings (ratings) remains stable.
The affirmation of the ratings reflects Jupiter’s excellent risk-adjusted capitalisation, strong earnings track record and its importance to BP as a risk management tool. Offsetting rating factors include the captive’s high underwriting limits, as well as its concentrated investment portfolio, which predominantly consists of financial instruments linked to its ultimate parent, BP.
Jupiter’s underwritten risks consist largely of offshore and onshore property and business interruption cover. The captive enables BP to optimise its insurance protection in terms of scope and cost. In addition, Jupiter provides reinsurance to its sister captive, Saturn Insurance Inc.
The captive has reported excellent and stable underwriting profit margins over the past five years, driven primarily by the absence of large losses. However, softening market conditions and lower insured values due to BP’s divestments and lower oil prices have put significant downward pressure on Jupiter’s premium income. As its underwriting limits have remained unchanged, this is likely to increase the volatility in Jupiter’s future results.
Risk-adjusted capitalisation is expected to remain excellent. A capital base of approximately USD 6.4 billion for 2016 continues to adequately support the captive’s high net retention limit of USD 1.5 billion.
Jupiter’s investments are highly concentrated, with 99% invested in discount notes issued by BP International Limited, with durations between one and 12 months at year-end 2016. Consequently, A.M. Best considers Jupiter’s financial strength to be closely linked to that of BP.
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.
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