AM Best has reaffirmed Saturn Insurance Inc.’s Financial Strength Rating of A- (Excellent) and Long-Term Issuer Credit Rating of “a-” (Excellent). Saturn, based in Burlington, VT, is a captive insurer for BP p.l.c. (BP) [NYSE: BP], a leading global energy company. The outlook for these ratings is stable.
The ratings reflect Saturn’s strong balance sheet strength, adequate operating performance, limited business profile, and effective enterprise risk management. Additionally, the ratings benefit from support from Saturn’s affiliate, Jupiter Insurance Limited, BP’s largest captive insurer, which provides significant reinsurance support to Saturn.
Saturn’s balance sheet strength is bolstered by its strong risk-adjusted capitalization, as indicated by Best’s Capital Adequacy Ratio (BCAR). However, this strength is somewhat mitigated by the captive’s concentrated investment portfolio and its high reliance on reinsurance to safeguard against high-severity, low-frequency losses. Additionally, Saturn’s relatively small capital base, combined with the large policy limits it offers, makes its risk-adjusted capital more susceptible to potential volatility. As of the end of 2023, over 99% of its investments were short-term intragroup deposits with two BP subsidiaries.
AM Best considers Saturn’s operating performance adequate, with a five-year weighted average return-on-equity ratio of 4.4%. This performance is supported by solid underwriting profitability, as evidenced by a five-year weighted average combined ratio of 38.6%, according to AM Best’s calculations.
AM Best anticipates that Saturn’s earnings will remain relatively modest and subject to potential volatility due to the large net policy limits it provides in relation to its premium base.
Saturn’s business profile is assessed as limited, reflecting its small and concentrated portfolio of high-risk business from the BP group in the U.S. The portfolio includes terrorism coverage under the Terrorism Risk Insurance Act, workers’ compensation insurance, environmental protection, and financial responsibility certificates. The captive’s gross written premium fell by approximately 80% over the past decade due to BP’s divestments, lower oil prices, and soft market conditions. However, recent years have shown some recovery, with premium growth reported in 2022 and 2023.
AM Best continues to lead in rating alternative risk transfer entities, with over 200 such entities rated globally. For the latest Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, visit www.ambest.com/captive.
This press release pertains to Credit Ratings published on AM Best’s website. For complete rating information, including disclosures and details on the office responsible for each rating, visit AM Best’s Recent Rating Activity web page. For more information on the use and limitations of Credit Rating opinions, refer to the Guide to Best’s Credit Ratings. For guidelines on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, and AM Best press releases, consult the Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher, and data analytics provider specializing in the insurance industry. Headquartered in the U.S., it operates in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore, and Mexico City. For more information, visit www.ambest.com.
