LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Stellar Insurance, Ltd. (Stellar) (Bermuda), a subsidiary of Saudi Arabian Oil Company (Saudi Aramco), the state-owned oil company of Saudi Arabia. The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Stellar’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).
Stellar’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects Stellar’s risk-adjusted capitalisation to remain at the strongest level, supported by low underwriting leverage and full earnings retention.
Saudi Aramco has strengthened Stellar’s capital position by allowing the captive to retain all profits generated since its incorporation in 2001. This has enabled Stellar to increase its net underwriting capacity gradually. An offsetting rating factor remains the captive’s reliance on reinsurance to provide high limit energy cover. However, the credit risk to sizeable exposure is mitigated by Stellar’s use of a diversified panel of financially strong reinsurers.
Stellar has reported strong operating results over the past five years, mainly driven by robust underwriting profits in the absence of large losses. Prospective performance is subject to volatility due to the captive’s exposure to high severity, low frequency losses in its energy programme.
Stellar’s business profile and ERM capabilities reflect the key role it plays in Saudi Aramco’s overall risk management framework. As a single parent captive, its purpose is to provide financial risk transfer solutions for risks emanating from Saudi Aramco’s operations. Stellar’s business mix consists of energy onshore and offshore property, general liability risks and associated business interruption cover. The company has indicated that under the terms and conditions of its property programme, it presently considers there to be no exposure to the damage sustained at the Saudi Aramco facilities at Abqaiq and Khurais in September 2019.
AM 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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