A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of Park Assurance Company (Park) (Burlington, VT). The outlook for both ratings is stable. The ratings of Park reflect its excellent risk-adjusted capitalization, operating performance, liquidity position, sophisticated risk management strategy and practices, conservative investment strategy, its management team's extended experience in the industry and its role as a single parent captive of JPMorgan Chase & Co. [NYSE: JPM], a leading global financial services group. Partially offsetting these positive rating factors are Park’s large gross underwriting exposures as it offers very high insurance limits and insures some properties with substantial insured values. Park is very dependent on reinsurance in order to offer its various property programs and high limits. Park provides JPMorgan Chase & Co. with global property coverages, including coverages against terrorism losses, and effective as of July 8, 2011, deductible reimbursement policies covering workers’ compensation, auto liability and general liability (pursuant to the Hatherley novation and transfer agreement). As such, these coverages are key components of JPMorgan Chase & Co.'s risk management strategy, and Park benefits from the group's significant financial resources. JPMorgan Chase & Co. also benefits from the group's extensive risk mitigation and safety programs. As Park reinsures a large portion of its global property program, its exposure to underwriting losses is minimal, barring significant losses from terrorism. It only uses well-rated reinsurers, and its surplus base is more than adequate to support its asset and credit risk exposures. However, as Park offers very high limits, its resulting gross underwriting exposures on its largest properties are also very high. Its dependence on reinsurance is therefore substantial, creating considerable credit risk in the event of exceptionally large losses. In addition, it is dependent on the protection afforded by the Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA). While the TRIPRA program offers significant protection from terrorism losses, the net impact on Park could still be burdensome, considering the high coverage limits offered. Nevertheless, A.M. Best recognizes the low probability of such extreme events and the support available to Park as part of JPMorgan Chase & Co.
A.M. Best views Park’s management and corporate strategy as strengthening the ratings, given the conservative underwriting, operational goals and transparency. A.M. Best views the company's enterprise risk management practices as strong given their impact on conservative risk culture, defined risk controls and optimization of Park’s capital and surplus. Other factors considered in the rating process include, but are not limited to, the diversification in line of business and geography, as well as the company's panel of well-capitalized and highly rated reinsurers. The support and commitment of the parent and the captive's mission have been considered as positive factors.A.M. Best expects Park’s future operating performance to be stable but strong, and the stable earnings profile should further support the company to control its growth and business writing consistent with its capital and surplus position. Park’s ratings and outlook are not expected to be upgraded within the next 12-24 months as its operating performance and capital position already have been considered in the ratings process. A.M. Best could downgrade Park’s ratings and/or revise the outlook if its Best's Capital Adequacy Ratio (BCAR) score declines, operating performance and risk profile deteriorate, insured losses deplete capital, significant changes and turnover occur in its management team and/or risk management controls and tolerances, or its parent's ratings deteriorate. 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. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive. The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology. A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.