A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of Sooner Insurance Company (Sooner) (Burlington, VT). The outlook for both ratings is stable.
The ratings are based on Sooner’s excellent capitalization, history of consistently producing net underwriting income and net income, as well as being the captive insurer for its ultimate parent, ConocoPhillips [NYSE: COP]. The ratings also consider the parent’s overall risk management strategy and Sooner’s core involvement in this strategy.
Partially offsetting these positive rating factors is the possible change in net retentions that could happen year over year, as well as the limited diversification of business written, which is expected with a single parent captive.
Sooner has a history of strong underwriting results and operating returns. Its loss experience has remained favorable due, in part, to ConocoPhillips’ strong risk management program. ConocoPhillips’ corporate insurance and health, safety & environmental groups conduct periodic reviews of its potential loss exposures through a specialist in industrial risks. From year to year, Sooner may have high net retentions based upon the capacity of the overall insurance market. However, if net retentions were to increase, Sooner does have the capital to retain these risks. Although the majority of the company’s capital is loaned to its parent, there is limited counterparty risk due to this affiliation as well as the parent’s strong balance sheet and history of positive earnings.A.M. Best is unlikely to upgrade Sooner’s ratings over the long term due to its limited market profile. Key rating drivers that could lead to rating downgrades are a significant loss of surplus, consistent adverse reserve development and/or a significant change in Sooner’s risk profile. A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world.
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