AM Best has affirmed the financial strength rating of ‘A’ (Excellent) and long-term issuer credit rating (ICR) of ‘a’ (Excellent) for a captive insurer of BP (bp), Jupiter Insurance, with the agency affording these credit ratings a ‘stable’ outlook. Best says these ratings are indicative of Jupiter’s ‘very strong’ balance sheet, in conjunction with its strong operating performance, neutral business profile, and appropriate enterprise risk management, with the ratings factoring in a neutral impact from parent company, bp. The agency cites Jupiter’s ‘strongest level’ risk-adjusted capitalisation — measured by Best’s capital adequacy ratio (BCAR) — as underpinning its balance sheet strength with the company’s BCAR scores expected to remain “comfortably” above the minimum threshold for the strongest assessment level. A key reason for this is the captive’s strategy to maintain sufficient capital buffers to absorb potential volatility arising from exposure to high-severity, low-frequency loss, although a partially offsetting factor, Best highlights, is Jupiter’s concentrated investment portfolio, of which 99 per cent is accounted for by short-term intragroup deposits. Jupiter’s 2020 to 2024 five-year weighted average return-on-equity ratio of 9.3 per cent is indicative of ‘strong’ operating results, according to Best, with earnings supported by robust underwriting profits, evidenced by a weighted average combined ratio of 21.9 per cent, with supplementation by “solid” investment income generated from the heightened interest rate environment in recent years. Moreover, the captive’s neutral business profile is reflective of its “key role” within bp’s overall risk management framework, as its principal captive insurer, with its underwriting risks consisting predominantly of onshore and offshore property damage and business interruption covers. According to Best, and despite a decade of declining premium levels caused by soft rate environment and divestments by bp, Jupiter’s premium income saw a return to growth in both 2023 and 2024, with new insurable risks placed with the captive laying the foundation for this uptick. Furthermore, Best also expects moderate premium growth to continue over the medium-term, with support from bp group’s planned asset investments.
