A.M. Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” of Palms Insurance Company, Limited, located in George Town, Cayman Islands.
The outlook of these credit ratings remains stable, according to A.M. Best.
The ratings reflect on Palms’ balance sheet strength which A.M. Best categorised as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
A.M Best said that 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 acknowledge Palms’ history of maintaining sufficient capital and financial resources to support its ongoing obligations.
Palms has a limited market scope and high net loss potential stemming from a single, severe occurrence relative to its surplus.
A.M. Best noted that this is mitigated somewhat by the firm's "excellent loss history, favourable geographic spread of risk and Palms’ historically strong surplus position”.
"While Palms depends on third parties for processing, servicing and administration, the senior management of its ultimate parent, NextEra Energy (NEE) is involved closely in these operations,” A.M. Best added.
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/casualty coverages, workers’ compensation, automobile liability, employers’ liability and property risk.
Although Palms participates in a range of coverages for very large risks, A.M. Best explained 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.
"However, 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," A.M. Best added.
