A.M. Best has affirmed the financial strength rating of “A- (Excellent)” and the issuer credit rating of “a-” of Saturn Insurance of Burlington, Vermont.
Saturn is a captive of UK-based integrated global oil and gas company, BP. The outlook for both ratings is stable.
According to the agency, the ratings reflect Saturn’s “strong” risk-adjusted capitalisation and “good financial performance over the last two years”. In addition, the ratings factor in BP’s financial strength and commitment to Saturn.
Risk-adjusted capitalisation is expected by A.M Best to remain strong. Internal capital generation is expected to support an increase in underwritten risk over the medium term from new lines of business.
Saturn writes large gross line sizes relative to its balance sheet size but comprehensive reinsurance with its sister company, Jupiter Insurance Limited, protects its balance sheet.
Furthermore, Saturn benefits from low investment risk, with cash or short term deposits representing about half of its investment portfolio. The remainder comprises a deposit with BP, which has “excellent liquidity terms” according to A.M. Best.
The agency stated: “Saturn’s underwriting performance was strong in 2014, demonstrated by a combined ratio of 29 percent.”
“Technical performance benefited from benign claims experience, reflecting the low-risk profile of the majority of its risks. The captive’s importance to and integration within BP’s overall risk management framework is a positive rating factor.”
Further development of Saturn’s business profile, maintenance of good technical performance and continued importance of the captive to the BP group would lead to positive rating pressure for A.M Best.
A.M Best confirmed that negative rating actions may arise from any “material deterioration” in Saturn's risk-adjusted capitalisation, or a significant increase in retention levels on Saturn’s current and planned programmes without a commensurate increase in its capital base.
