AM Best Affirms Credit Ratings of Saturn Insurance Inc.

Rhea-AI Summary

AM Best affirms Saturn Insurance's ratings

Positive

• AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of 'a-' (Excellent) of Saturn Insurance Inc.
• Saturn's balance sheet strength is strong and it has adequate operating performance
• Saturn's investments are closely linked to BP's credit profile
• Saturn's underwriting performance remained favorable in 2022

Negative

• Saturn has a relatively small capital base and a concentrated investment portfolio
• Saturn depends heavily on reinsurance to protect its balance sheet strength
• Saturn's business profile is limited with a small and concentrated portfolio

LONDON--(BUSINESS WIRE)-- AM Best has 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 insurer of BP p.l.c. (bp) [NYSE: BP], an integrated global energy company. The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Saturn’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also consider rating enhancement from Saturn’s affiliate, Jupiter Insurance Limited, which is the principal captive of the bp group and provides substantial reinsurance support to Saturn.

Saturn’s balance sheet strength is underpinned by its strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). Partially offsetting rating factors include the captive’s concentrated investment portfolio and high dependence on reinsurance to protect its balance sheet strength against high-severity, low-frequency losses. The ratings also factor in the company’s relatively small capital base, which, considering the large limits offered, exposes its risk-adjusted capitalisation to potential volatility. Investments are highly concentrated, with over 99% accounted for by short-term intra group deposits with two bp subsidiaries, North America Funding Company and BP International Limited, at year-end 2022. Consequently, AM Best considers Saturn’s investments to be closely linked to bp’s credit profile.

Saturn has a track record of solid underwriting profitability, as demonstrated by a five-year (2018-2022) weighted average combined ratio of 40.9%, as calculated by AM Best. Although the captive’s underwriting performance deteriorated in 2022 compared with 2021 due to adverse claims experience of prior accident years, it remained favourable with a combined ratio, as calculated by AM Best, of 85.6%. AM Best expects Saturn’s prospective operating performance to remain aligned with an adequate assessment over the medium term, albeit remaining subject to potential volatility given the large net policy limits compared with its premium base.

AM Best assesses Saturn’s business profile as limited, reflecting its small and concentrated portfolio of high-risk business emanating from the bp group in the United States. Saturn’s portfolio consists primarily of terrorism cover for Terrorism Risk Insurance Act certified property damage and business interruption, workers’ compensation insurance, environmental protection, and certificate of financial responsibility cover. Declining insured values due to bp’s divestments, lower oil prices and soft market conditions in recent years have led to a drop in the captive’s gross written premium by approximately 81% since 2014; however, some of these trends reversed in 2022.

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.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising 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.

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231006341245/en/

Marving Lopez

Financial Analyst

+44 20 7397 4389

marving.lopez@ambest.com

Christopher Sharkey

Associate Director, Public Relations

+1 908 882 2310

christopher.sharkey@ambest.com

Kanika Thukral

Associate Director, Analytics

+44 20 7397 0327

kanika.thukral@ambest.com

Al Slavin

Senior Public Relations Specialist

+1 908 882 2318

al.slavin@ambest.com

Source: AM Best

FAQ

What are Saturn Insurance's ratings?

AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of 'a-' (Excellent) for Saturn Insurance Inc.

What is Saturn's balance sheet strength?

AM Best assesses Saturn's balance sheet strength as strong.

What is Saturn's underwriting performance?

Saturn has a track record of solid underwriting profitability, with a five-year weighted average combined ratio of 40.9%.

What is Saturn's business profile?

AM Best assesses Saturn's business profile as limited, reflecting its small and concentrated portfolio of high-risk business.

What are the negative factors for Saturn?

Saturn has a relatively small capital base, a concentrated investment portfolio, and depends heavily on reinsurance.

How are Saturn's investments linked to BP?

Saturn's investments are closely linked to BP's credit profile.

What is the outlook for Saturn's ratings?

The outlook for Saturn's ratings is stable.