Ratings agency 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.
The outlook of the ratings for the Cayman-based captive are stable.
The ratings are reflective of Palms’ balance sheet strength, categorised by A.M. Best as strongest, in addition to its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Also considered in the ratings is Palms’ solid risk-adjusted capitalisation, history of consistently positively operating performance and conservative balance sheet strategies, as well as the captive’s history of maintaining sufficient capital and financial resources to support its ongoing obligations.
A pure captive wholly owned by NextEra Energy Capital Holdings (NEECH), which in turn is wholly owned by NextEra Energy (NEE), the significant role of Palms’ in the risk management structure of its parent was also recognised in the ratings.
Although Palms participates in a range of coverages for very large risks, these 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.
Prospective underwriting performance remains subject to volatility, due to exposure to low frequency, high severity claims in its property program, as the industry it operates in is fundamentally volatile.
Offsetting the ratings partially is the captive’s limited market scope and high net loss potential stemming from single, severe occurrence relative to surplus, but, this is somewhat mitigated by the company’s excellent loss history, favourable geographic spread of risk and Palms’ history of strong surplus position.