A.M. Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” of Park Assurance Company.
The ratings reflect Park’s balance sheet strength, which A.M. Best categorises as strongest, as well as its “strong” operating performance, “limited” business profile and “appropriate” enterprise risk management.
A.M. Best explained that Park’s strongest risk-adjusted capital position reflects its conservative loss reserving practices and favourable development trends, along with its conservative investment portfolio and strong liquidity measures.
The ratings further reflect Park’s risk management strategy and practices, management team and its integral role as a single-parent captive of J.P. Morgan Chase Holdings, which is a subsidiary of J.P. Morgan Chase & Co., a global financial services group.
Partially offsetting these factors, according to A.M. Best, is the tempered surplus growth as a result of capital returned to its parent in the form of periodic stockholder dividends and its large underwriting risk appetite on a gross basis.
A.M. Best said: “The potential credit risk associated with Park’s extensive use of reinsurance, which management utilises to mitigate its exposure to oversized losses on substantially valued insured locations, is also an offsetting factor.”
Park provides J.P. Morgan Chase with global property coverages, including terrorism, as well as bankers blanket bond, and prior to 2017, general liability coverage.
Park is well-capitalised through retained earnings as A.M. Best noted that the captive has reported consistently favourable pure loss ratios in combination with its low-cost underwriting expense structure to produce favourable operating earnings year after year that has outperformed the commercial property composite by a wide margin.
The rating company said: “Despite the level of capitalisation, the captive is reliant on the protection afforded by the Terrorism Risk Insurance Program Reauthorisation Act of 2015 (TRIPRA), and while the TRIPRA programme offers significant protection from terrorism losses, the net impact on Park still could be burdensome. Nevertheless, A.M. Best recognises the low probability of such extreme events and the support available to Park as a single-parent captive of J.P. Morgan Chase.”