AM Best Affirms Saturn Insurance Inc.’s Credit Ratings

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.

This press release refers to the credit ratings that are published on the AM Best website. For all rating information relating to the release and related disclosures, including details of the agency responsible for issuing each of the individual ratings mentioned in this release, please see AM Best’s web page for recent rating activities. For further information on the use and limitations of credit score opinions, please see Best’s Guide to Credit Scores. For information on the proper use of Best’s credit ratings, Best’s performance ratings, Best’s preliminary credit ratings, and AM Best’s press releases, please see the Guide to the Proper Use of Best’s Ratings and Ratings.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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