A.M. Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” (Excellent) of Palms Insurance Company, George Town, Cayman Islands.
The outlook of these credit ratings is stable.
The ratings reflect Palms’ balance sheet strength, which A.M. Best assessed as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The ratings reflect Palms’ solid risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), consistent positive operating performance and conservative balance sheet strategies, as well as its strong management and significant role within the risk management structure of its parent, NextEra Energy Capital Holdings, (NEECH).
The ratings also recognise Palms’ history of maintaining sufficient capital and financial resources to support its ongoing obligations.
Palms currently provides coverage primarily for the energy and utility industry and has high net loss potential stemming from a single, severe occurrence relative to its surplus.
“This is mitigated somewhat by the company’s excellent loss history, favourable geographic spread of risk and Palms’ historically strong surplus position,” explains A.M Best.
Palms is a single-parent insurer wholly-owned by NEECH, which in turn is wholly-owned by NextEra Energy.
Palms primarily accepts insurance risks from NEE and its affiliates, providing specialised direct and assumed property, casualty coverages, workers’ compensation, automobile liability, employers’ liability.
It has also started to provide coverage to non-affiliated entities in January 2021.
Palms has expanded and enhanced its underwriting structure with the necessary talent and expertise to support the expansion into third-party business.
Although the insurer participates in a range of coverages of its parent company for very large risks, A.M. Best states that these risks are underwritten with tight guidelines and significant loss control measures by the insured affiliates, as evidenced by favourable loss ratios over the past five years.
“Nonetheless, prospective underwriting performance remains subject to volatility, due to Palms’ exposure to low frequency, high severity claims in its property programme, which includes coverage for NEE’s renewable energy interests and the newer third-party coverage,” A.M. Best concludes.
