AM Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” (Excellent) of Jupiter Insurance Limited (Jupiter), a Guernsey-based captive insurer of the global energy company BP.
The outlook of these credit ratings is stable.
The ratings reflect Jupiter’s balance sheet strength, which AM Best assesses as “very strong”, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
Jupiter’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by AM Best’s capital adequacy ratio.
A partially offsetting factor is the captive’s concentrated investment portfolio, as well as its high underwriting limits provided to several facilities. This could result in volatility in the captive’s solvency position in the event of large losses, according to the ratings company.
Jupiter does not purchase any outward reinsurance cover, supporting BP’s strategy to retain risks when possible.
The captive has reported strong operating results over the past five years (2018-2022), demonstrated by a weighted average return-on-equity ratio of 8.1 per cent, mainly driven by strong underwriting profits.
Operating performance is subject to volatility arising from the exposure to high-severity, low-frequency losses in conjunction with the large line sizes offered, relative to the captive’s premium.
Jupiter’s business profile assessment reflects its role in BP’s overall risk management framework, as its principal captive insurer. Jupiter’s underwritten risks consist mainly of onshore and offshore property damage and business interruption cover.
Declining insured values due to BP’s divestments, lower oil prices and soft market conditions have put downward pressure on Jupiter’s premium income in recent years.
The captive allows the group to optimise its insurance protection in terms of scope and cost. Additionally, Jupiter provides significant reinsurance to its sister company, Saturn Insurance Inc.
