A.M. Best has affirmed the financial strength rating of “A” (Excellent) and the issuer credit rating of “a” of Palms Insurance Company. The outlook for both ratings remains stable.
According to A.M. Best, the ratings reflect Palms's “excellent” risk-adjusted capitalisation, history of consistently strong operating performance and “conservative” balance sheet strategies, as well as the captive's integration within the risk management structure of its parent, NextEra Energy Capital Holdings (NEECH).
The ratings also recognise Palms’s history of maintaining sufficient capital and financial resources to support its ongoing obligations.
A.M. Best stated: “Partially offsetting these positive rating factors are Palms's limited market scope and high net loss potential stemming from a single, severe occurrence relative to surplus.”
“Nevertheless, this is somewhat mitigated by the company’s excellent loss history, favourable geographic spread of risk and the history of support of Palms’s strong surplus position by its parent.”
While Palms depends on third parties for processing, servicing and administration, the senior management of its ultimate parent, NextEra Energy (NEE), is closely involved in these operations.
Palms is a single parent, or pure captive, insurer wholly owned by NEECH, which in turn is wholly owned by NEE.
Palms accepts insurance risks only from NEE and its affiliates, providing specialised direct and assumed property and casualty coverages: workers' compensation, automobile liability, employers’ liability and property risk.
Although Palms participates in a range of coverages for very large risks, these risks are underwritten with tight guidelines and significant loss control measures by the insured affiliates as evidenced by a favourable loss ratio of less than 40 percent over the past five years.
A.M. Best has said that it believes Palms is well-positioned at its current rating levels, and the ratings are not expected to be upgraded or their outlook revised in the near term.
