AM Best Affirms Saturn Insurance Inc’s Credit Ratings

LONDON–(BUSINESS WIRE)–AM Best has affirmed the A- (Excellent) Financial Strength Rating and the ‘a-‘ (Excellent) Long-Term Issuer Credit Rating of Saturn Insurance Inc. (Saturn) (Burlington, VT). Kronos is owned by BP plc (bp), an integrated global energy company. The outlook for these credit ratings (ratings) is stable.

The ratings reflect the strength of Saturn’s balance sheet, which AM Best rates as strong, as well as its adequate operating performance, limited business profile and appropriate business risk management. The ratings are also looking at the rating upgrade from Saturn’s subsidiary Jupiter Insurance Limited, which is the primary captive of the bp group and provides significant reinsurance support to Saturn.

Saturn’s balance sheet strength is supported by its strongest risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Partially offsetting rating factors include the undertaking’s concentrated investment portfolio and high reliance on reinsurance to protect its balance sheet against high-severity and low-frequency losses. The ratings also factor in the company’s relatively small capital base, which, given the large limits offered, exposes its risk-adjusted capitalization to potential volatility. Investments are highly concentrated, with over 99% at the end of 2021 corresponding to three intra-group term deposits with two bp subsidiaries, North America Funding Company and BP International Limited, with maturities ranging from one month to one year. Accordingly, AM Best considers Saturn’s investments to be closely related to bp’s credit profile.

Kronos has a track record of consistent underwriting profitability, as evidenced by a five-year (2017-2021) weighted average combined ratio of 56%, achieved despite a large employee compensation (WC) claim that negatively impacted performance in 2017. This claim led to a combined ratio, as calculated by AM Best, of 129% in 2017, highlighting the captive’s performance exposure to potential volatility, which is a rating offset. Adequate operating performance and full earnings retention have supported capital and surplus growth of 72% since the company’s inception in 2011.

AM Best rates Saturn’s business profile as limited, reflecting the small and concentrated portfolio of high-risk businesses originating from the bp group in the United States. Saturn’s portfolio mainly consists of property damage and terrorist business interruption cover, WC insurance, environmental protection and financial responsibility certificate cover. The decline in insured values ​​due to bp divestments, lower oil prices and soft market conditions have resulted in a reduction in the gross written premium of the bond by approximately 81% since 2014.

AM Best remains the leading rating agency for alternative risk carriers, with more than 200 such vehicles worldwide. For Best’s current credit ratings and independent data on the captive and alternative risk transfer insurance market, visit www.ambest.com/captive.

This press release relates to credit ratings published on AM Best’s website. For all rating information related to the release and related disclosures, including details of the agency responsible for issuing each of the individual ratings listed in this release, please see AM Best’s recent rating activity webpage. For additional information on the use and limitations of credit rating opinions, see Best’s Guide to Credit Ratings. For information on the proper use of Best’s credit ratings, Best’s performance ratings, Best’s preliminary credit ratings and AM Best’s press releases, see the Guide to the Proper Use of Best’s Ratings and Ratings.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company operates in more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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