LONDON-(BUSINESS WIRE)–AM Best affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of ‘a-‘ (Excellent) of Saturn Insurance Inc. (Saturn) (Burlington, VT). Saturn is a captive of BP plc (bp), an integrated global energy company. The outlook for these credit ratings (ratings) is stable.
The ratings reflect the strength of Saturn’s balance sheet, which AM Best rates as strong, as well as its adequate operating results, limited business profile and appropriate corporate risk management. The ratings also take into account the upgrade from Saturn’s subsidiary, Jupiter Insurance Limited, which is the parent entity of bp group and provides significant reinsurance support to Saturn.
Saturn’s balance sheet strength is supported by its strongest risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR). Partially offsetting rating factors include the captive’s concentrated investment portfolio and heavy reliance on reinsurance to protect its balance sheet against heavy and low-frequency losses. The ratings also take into account the company’s relatively small capital base, which, given the large limits offered, exposes its risk-adjusted capitalization to potential volatility. Investments are highly concentrated, with over 99% at the end of 2021 attributable to three intra-group term deposits with two bp subsidiaries, North America Funding Company and BP International Limited, with maturities ranging from one month to one year. AM Best therefore considers Saturn’s investments to be closely related to bp’s credit profile.
Saturn has a track record of solid underwriting profitability, as evidenced by a five-year (2017-2021) weighted average combined ratio of 56%, which was achieved despite a large workers’ compensation (WC) claim that negatively impacted 2017 performance. This statement resulted in a combined ratio calculated by AM Best of 129% in 2017, highlighting the captive performance’s exposure to potential volatility, which is a valuation offset. Adequate operational performance and full earnings retention have supported capital growth and surplus of 72% since the company’s inception in 2011.
AM Best rates Saturn’s business profile as limited, reflecting its small and concentrated portfolio of high-risk businesses originating from bp group in the United States. Saturn’s portfolio primarily consists of business interruption property damage and terrorism coverage, toilet insurance, environmental protection and financial responsibility certificate coverage. Declines in insurance values due to bp sales, lower oil prices and adverse market conditions resulted in a decline in captivator gross written premium of approximately 81% from 2014.
AM Best remains the leading rating agency for alternative risk transfer entities, with more than 200 such vehicles rated worldwide. For Best’s up-to-date credit ratings and independent market data for captive and alternative risk transfer insurance, please visit www.ambest.com/captive.
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