A.M. Best Europe – Rating Services Limited has affirmed the
financial strength rating of A (Excellent) and issuer credit rating of
“a” of Jupiter Insurance Limited(Jupiter) (Guernsey). The
outlook for both ratings is stable. Jupiter is a captive of BP p.l.c.
(BP), an integrated global oil and gas company.
The ratings reflect Jupiter’s strong risk-adjusted capitalisation and
good underwriting performance. An offsetting factor for the ratings
remains Jupiter’s high level of risk retention, as well as its
concentrated investment portfolio, which is held mostly with its parent,
Jupiter’s risk-adjusted capitalisation deteriorated in 2011, following
an increase of 71% in net premiums written to USD 1,948 million (2010:
USD 1,140 million), which was largely precipitated by an increase in the
underwriting limit. Over the past few years, risk retention per event
has increased significantly from USD 700 million in 2010 to USD 1,500
million as at 1 April 2011. Nevertheless, risk-adjusted capitalisation
is expected to remain at a strong level over the medium term.
In 2011, the company reported an improvement in its technical
performance with an underwriting profit of USD 1,680 million (2010: USD
461 million). This result was largely driven by the increase in earned
premium and the reduction in net claims incurred, as a result of a lack
of large claims during the year. Given the nature of business
underwritten, technical results can be volatile year on year. The
significant growth in Jupiter’s underwriting portfolio in recent years
could potentially contribute to the underlying volatility inherent in
the lines of business underwritten.
Jupiter has over 99% of its asset base (2011: USD 7,952 million)
invested in its parent via two discount notes of three months and 30-day
duration. Despite Jupiter’s lack of reinsurance protection and large
underwriting limit, A.M. Best considers that the company’s capital base
could adequately absorb a small number of major claims.
Following the Gulf of Mexico oil spill in 2010, improvements in BP’s
risk management and safety are ongoing. These improvements could
potentially have a positive impact on Jupiter’s claims experience in the
Upward rating actions are unlikely at present.
Downward rating actions may occur if there were a significant
deterioration in the company’s risk-adjusted capitalisation and/or a
material increase in the retention levels on Jupiter’s fronted programme
(COMET). Additionally, any deterioration in the credit rating of BP
could lead to negative actions being taken on Jupiter’s current rating.
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a
comprehensive explanation of A.M. Best’s rating process and contains the
different rating criteria employed in the rating process. Key criteria
utilised include: “Alternative Risk Transfer (ART)”; “Catastrophe
Analysis in A.M. Best Ratings”; “Risk Management and the Rating Process
for Insurance Companies”; “Rating Members of Insurance Groups”; and
“Understanding Universal BCAR”. Best’s Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the following is a
link to required disclosures: A.M.
Best Europe - Rating Services Limited Supplementary Disclosure.
A.M. Best Europe – Rating Services Limited is a subsidiary of A.M.
Best Company.Founded in 1899, A.M. Best Company is the world's
oldest and most authoritative insurance rating and information source.
For more information, visit www.ambest.com.
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