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 ratings reflect Jupiter’s balance sheet strength, which A.M. Best categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
Jupiter’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). Offsetting rating factors include the captive’s high underwriting limits provided to a number of different locations and facilities, as well as its concentrated investment portfolio, which predominantly consists of financial instruments linked to its ultimate parent, BP.
A.M. Best expects Jupiter’s risk-adjusted capitalisation to remain at the strongest level, supported by strong internal capital generation and a capital base of approximately USD 6.5 billion as at year-end 2017 that continues to support the captive’s high maximum line size of USD 1.5 billion. The captive does not purchase any outward reinsurance cover. Jupiter’s investments are highly concentrated, with 99% invested in discount notes issued by BP International Limited (durations between one and 12 months). Consequently, A.M. Best considers Jupiter’s financial strength to be linked closely to that of BP.
The captive has reported strong operating results over the past five years, mainly driven by strong underwriting profits in the absence of large losses. However, softening market conditions, 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 prospective operating results.
Jupiter’s business profile assessment reflects its key role in BP’s overall risk management framework, as its principal captive. Jupiter’s underwritten risks consist largely of offshore and onshore property, and business interruption cover. The captive allows BP to optimise its insurance protection in terms of scope and cost. In addition, Jupiter provides reinsurance to its sister captive, Saturn Insurance Inc.
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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