A.M. Best has affirmed the financial strength rating of “A (Excellent)” and the issuer credit rating of “a” of Sooner Insurance Company of Burlington, Vermont. The outlook for both ratings is stable.
According to the agency, the ratings reflect Sooner’s “excellent” capitalisation, history of consistent operating profitability driven by favourable underwriting results, conservative reserve levels and the position it holds as the captive insurer for its ultimate parent, ConocoPhillips.
The ratings also consider the level of commitment on the part of ConocoPhillips, whose management incorporates Sooner as a core element in its overall risk management programme.
Partially offsetting these positive rating factors are what A.M. Best has called Sooner’s “significant reinsurance credit risk” stemming from the large limits offered on its policies and the possible change in the captive’s net retentions that could happen year over year, as well as the limited diversification of business written, though this is expected with a single parent captive.
Sooner provides property damage, business interruption and general liability insurance to ConocoPhillips and its subsidiaries worldwide.
The captive has a history of generally positive underwriting results and strong operating return measures. Over a 10-year period, the company’s loss experience has remained favourable due, in part, to ConocoPhillips’s strong risk management programmes.
ConocoPhillips’s corporate insurance and health, safety and environmental groups conduct periodic reviews of their potential loss exposures through a specialist in industrial risks.
According to A.M. Best, Sooner may have high net retentions based upon the capacity of the overall insurance market from year to year.
The agency stated: “Nonetheless, Sooner does have the capital to retain these risks, if net retentions were to increase.”
“Although the majority of Sooner’s capital is loaned to ConocoPhillips, it is considered to have relatively low risk due to this affiliation as well as the parent’s strong balance sheet and history of positive earnings.”
A.M. Best confirmed it is unlikely to upgrade Sooner’s ratings over the long term due to its limited market profile.
Key rating drivers that could lead to rating downgrades are a significant loss of surplus, consistent adverse reserve development or a significant change in the company’s risk profile.
Deterioration in the credit profile of ConocoPhillips could also impact Sooner’s ratings.
