A.M. Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” of Stellar Insurance (Bermuda), a subsidiary of Saudi Arabian Oil Company (Saudi Aramco), the state-owned oil company of Saudi Arabia.
The outlook of these credit ratings (ratings) remains stable.
A.M. Best categorised Stellar’s balance sheet strength as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
Stellar’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by best’s capital adequacy ratio.
A.M. Best said it expected Stellar’s risk-adjusted capitalisation to remain at the strongest level, supported by low underwriting leverage and full earnings retention.
An offsetting rating factor remains the captive’s reliance on reinsurance to provide high limit energy cover. However, the credit risk to sizeable exposure is mitigated by Stellar’s use of a diversified panel of financially strong reinsurers.
Stellar has reported strong operating results over the past five years, mainly driven by robust underwriting profits in the absence of large losses. Prospective performance is subject to volatility due to the captive’s exposure to high severity, low-frequency losses in its energy programme.
Stellar’s business profile and enterprise risk management capabilities reflect the key role it plays in Saudi Aramco’s overall risk management framework. As a single parent captive, its purpose is to provide financial risk transfer solutions for risks emanating from Saudi Aramco’s operations.