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FOR IMMEDIATE RELEASE
LONDON - MAY 22, 2015 09:00 AM (EDT)
A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit rating (ICR) of "a" of Jupiter Insurance Limited (Jupiter) (Guernsey), a captive of BP p.l.c. (BP), an integrated global gas and oil company. The outlook for the FSR remains stable and the ICR remains positive.
The ratings reflect Jupiter's excellent capital adequacy and strong earnings track record. These positive rating drivers are partially offset by Jupiter's high net underwriting limits, as well as its concentrated investment portfolio, which predominantly consists of financial instruments linked to its parent, BP.
The positive outlook reflects the improving risk-management capabilities of the BP group in recent years. The captive is a key part of the parent's overall risk management framework.
Jupiter's underwritten risks consist largely of offshore and onshore property and business interruption cover. The captive enables BP to optimise its insurance protection in terms of scope and cost. In addition, Jupiter functions as a reinsurance vehicle to its sister captive, Saturn Insurance Inc.
Jupiter has consistently reported excellent and stable technical results over the last four years, driven primarily by the absence of significant large losses. The captive recorded an operating ratio of 1.3% in 2014.
Risk-adjusted capitalisation is expected to remain excellent. A capital base of about USD 7,400 million as of year-end 2014 adequately supports the captive's relatively high net retention limits of USD 1,500 million.
Additionally, a reduction in underwriting and asset risk has helped to maintain strong risk-adjusted capitalisation over the last three years, in spite of significant dividend payments to its parent.
A partly offsetting factor remains Jupiter's investments in two discount notes issued by BP International Limited with durations of three months and 30 days, respectively. A.M. Best considers the company's investment concentration to be high and, in turn, regards the financial strength of Jupiter to be inextricably linked to that of BP. The discount notes represented 99% of Jupiter's investment portfolio as of year-end 2014.
Positive rating actions may follow further embedding of the group's overall enterprise risk management, provided the captive's excellent level of risk-adjusted capitalisation and consistently strong operating performance are maintained.
Negative rating pressure would arise from material deterioration in Jupiter's risk-adjusted capitalisation. A significant increase in retention levels without a commensurate increase in the capital base would likely lead to a review of Jupiter's ratings. Additionally, any deterioration in the financial strength of BP could lead to negative rating actions for Jupiter.
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.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology .
Key insurance criteria reports utilized:
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best's Ratings & Criteria Center.
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