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 Saturn Insurance Inc. (Saturn) (Burlington, VT). Saturn is a captive of BP p.l.c. (BP), an integrated global oil and gas company. The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Saturn’s balance sheet strength, which A.M. Best categorises as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also consider rating lift from its reinsurer, Jupiter Insurance Limited (Jupiter), which is the principal captive of the BP group and provides substantial reinsurance support to Saturn.
Saturn’s balance sheet strength is supported by its risk-adjusted capitalisation being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Saturn writes large gross lines relative to the size of its capital base. However, reinsurance protects its balance sheet against high severity, low frequency losses. Offsetting rating factors remain the captive’s high reinsurance dependence, and relatively small capital base, which is exposed to potential volatility from the exposure to large losses.
Saturn benefits from low investment risk with approximately half of its assets invested in cash and cash equivalents. The remainder is composed of callable loans with a BP affiliate, with excellent liquidity terms.
Saturn achieved strong operating results during the period 2013–2016; however, a large workers’ compensation claim negatively impacted its performance in 2017, demonstrating its exposure to volatility. Saturn’s strong performance track record has supported growth in capital and surplus of 43% since its incorporation in 2011, with no dividends paid out during this period.
Saturn’s business profile is assessed as limited, reflecting its small and concentrated portfolio of high-risk products provided to the BP group in the United States. Saturn’s portfolio consists primarily of terrorism cover, certificate of financial responsibility, workers’ compensation insurance and environmental protection agency cover. The captive’s premiums have been impacted negatively by the soft rate environment over the past three years, with its gross written premiums reducing by approximately 60% since 2014.
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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