Stellar Insurance, a captive insurer of Saudi Arabian Oil Company, the state-owned oil company of Saudi Arabia, has had its financial strength rating of A (Excellent) and its long-term issuer credit rating of “a” affirmed by A.M. Best.
The outlook of these rating remains stable.
The ratings are reflective of Stellar’s balance sheet strength, categorised by A.M. Best as very strong, in addition to its strong operating performance, neutral business profile, and appropriate enterprise risk management (ERM).
The captive’s balance sheet strength is supported by its strongest level of risk-adjusted capitalisation, according to Best’s Capital Adequacy Ratio (BCAR) and takes into account the credit profile of Saudi Arabia.
Stellar’s risk-adjusted capitalisation is expected to remain at the strongest level, supported by low underwriting leverage and a comprehensive
Saudi Aramco has strengthened Stellar’s capital position and enhanced its underwriting capacity by allowing the captive to retain all profits generated since its incorporation in 2001.
As per BCAR, capital requirements are driven largely by investment risk, as the captive holds a significant proportion of assets in funds of varying liquidity and duration.
Stellar’s reliance on reinsurance to be able to provide high limit energy covers for its parent’s insurance needs remains a factor offsetting the ratings, however, this is mitigated partially by the captives diversified panel of financially strong reinsurers.
The captive’s strong operating performance is principally a result of robust underwriting results, as demonstrated by a five-year average combined ratio of 18.3 percent.
Prospective performance remains subject to volatility due to the captive’s exposure to high severity, low-frequency losses in its energy programme.
The captive uses non-proportional reinsurance to partly mitigate its exposure to peak risk.
As a single parent captive, Steller’s purpose is to provide financial risk transfer solutions for risks emanating from Saudi Aramco’s operations and this close integration to its parent’s risk management framework benefit the captive’s business profile and ERM.
Stellar’s business mix consists of energy onshore and offshore property, general liability risks, as well as associated business interruption cover.
