AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Saturn Insurance Inc. (Saturn) (Burlington, VT). Saturn is a captive insurer of BP p.l.c. (bp) [NYSE: BP], an integrated global energy company. The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Saturn’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also consider rating enhancement from Saturn’s affiliate, Jupiter Insurance Limited, which is the principal captive of the bp group and provides substantial reinsurance support to Saturn.

Saturn’s balance sheet strength is underpinned by its strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). Partially offsetting rating factors include the captive’s concentrated investment portfolio and high dependence on reinsurance to protect its balance sheet strength against high-severity, low-frequency losses. The ratings also factor in the company’s relatively small capital base, which, considering the large limits offered, exposes its risk-adjusted capitalisation to potential volatility. Investments are highly concentrated, with over 99% accounted for by short-term intra group deposits with two bp subsidiaries, North America Funding Company and BP International Limited, at year-end 2022. Consequently, AM Best considers Saturn’s investments to be closely linked to bp’s credit profile.

Saturn has a track record of solid underwriting profitability, as demonstrated by a five-year (2018-2022) weighted average combined ratio of 40.9%, as calculated by AM Best. Although the captive’s underwriting performance deteriorated in 2022 compared with 2021 due to adverse claims experience of prior accident years, it remained favourable with a combined ratio, as calculated by AM Best, of 85.6%. AM Best expects Saturn’s prospective operating performance to remain aligned with an adequate assessment over the medium term, albeit remaining subject to potential volatility given the large net policy limits compared with its premium base.

AM Best assesses Saturn’s business profile as limited, reflecting its small and concentrated portfolio of high-risk business emanating from the bp group in the United States. Saturn’s portfolio consists primarily of terrorism cover for Terrorism Risk Insurance Act certified property damage and business interruption, workers’ compensation insurance, environmental protection, and certificate of financial responsibility cover. Declining insured values due to bp’s divestments, lower oil prices and soft market conditions in recent years have led to a drop in the captive’s gross written premium by approximately 81% since 2014; however, some of these trends reversed in 2022.

AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 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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