AM Best Affirms Credit Ratings of Jupiter Insurance Limited

AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Jupiter Insurance Limited (Jupiter) (Guernsey), 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 Jupiter’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management. In addition, the ratings factor in a neutral impact from the company’s owner bp.

Jupiter’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects Jupiter’s BCAR scores to remain comfortably above the minimum required for the strongest assessment, reflecting its strategy to maintain sufficient capital buffers to absorb potential volatility stemming from the company’s exposure to low frequency, high severity losses. Jupiter does not purchase any outward reinsurance cover, supporting bp’s current strategy to retain risks when possible. A partially offsetting factor is the captive’s concentrated investment portfolio, of which 99% is accounted for by short-term intragroup deposits, which are guaranteed by bp and placed with a bp subsidiary at year-end 2023.

The captive has reported strong operating results over the last five years (2019-2023), demonstrated by a weighted average return-on-equity ratio of 9.0%, mainly driven by robust underwriting profits. Prospective operating performance is subject to volatility arising from the exposure to high-severity, low-frequency losses in conjunction with the large line sizes offered, relative to the captive’s premium.

Jupiter’s business profile assessment reflects its key role in bp’s overall risk management framework, as its principal captive insurer. Jupiter’s underwritten risks consist mainly of onshore and offshore property damage and business interruption covers. Declining insured values due to bp’s divestments, lower oil prices and soft market conditions have led to a drop in the captive’s gross written premium by approximately 67% over the last decade. However, some of these trends reversed in recent years, with Jupiter reporting strong premium growth in 2022 and 2023.

As a risk management tool, the captive allows the group to optimise its insurance protection in terms of scope and cost. In addition, Jupiter provides significant reinsurance to its sister company, Saturn Insurance Inc.

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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