A.M. Best affirms ratings of Park Assurance Company

A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of Park Assurance Company(Park) (Burlington, VT). The outlook for both ratings is stable.

The ratings reflect Park’s strong balance sheet, excellent liquidity and conservative operating strategy. The ratings also recognize the company’s favorable operating results and its role as a single parent captive of JPMorgan Chase & Co. (JPMorgan Chase), a leading global financial services group.

Partially offsetting these positive rating factors are Park’s large gross underwriting exposures as it offers very high insurance limits and insures some properties with substantial insured values. Park is very dependent on reinsurance in order to offer its various property programs and high limits.

Park provides JPMorgan Chase with global property coverages, including coverages against terrorism losses. It is therefore a key component of JPMorgan Chase’s risk management strategy and benefits from the group’s significant financial resources. Park also benefits from the group’s extensive risk mitigation and safety programs. As the company cedes most of its global property program, its exposure to underwriting losses is minimal, barring significant losses from terrorism. Park uses only highly rated reinsurers, and its surplus base is more than adequate to support its asset and credit risk exposures. However, as the company offers very high limits, its resulting gross underwriting exposures on its largest properties also are very high. Park’s dependence on reinsurance is therefore substantial, creating considerable credit risk in the event of exceptionally large losses.

In addition, the company is dependent on the protection afforded by the Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA). While the TRIPRA program offers significant protection from terrorism losses, the net impact on Park could still be burdensome considering the high coverage limits offered. Nevertheless, A.M. Best recognizes the low probability of such extreme events and the support available to the company as part of JPMorgan Chase.