Triple Crown Assurance Co., the single parent captive owned by Southwest Airlines, has been assigned a financial strength rating of ‘A-‘ (Excellent) and a long-term issuer credit rating of ‘a-‘ (Excellent) by AM Best.
Triple Crown was formed in Texas 2020 and provides several coverages to the group, including workers’ compensation, employers’ liability, medical expense cost containment (MECC), terrorism, aviation, hail, and hull and liability.
AM Best said the ratings reflect the captive’s balance sheet strength, assessed by the ratings agency as “very strong”, and its “adequate operating performance”.
“The balance sheet strength assessment also considers the company’s conservative investment strategy, adequate liquidity measures and favorable loss reserve development over the last few years; however, this is partially offset by the captive’s elevated exposure to credit risk relative to its reinsurance treaties, as well as its higher-than-average underwriting leverage metrics,” the ratings statement said.
“Elevated credit risk arises from TCA’s participation in a contractual reinsurance arrangement with several creditworthy participating captives, although there has not been any credit loss among participants in the nearly 30-year history of the arrangement.”
The outlook for the credit ratings is stable.
“Negative rating actions could occur if future operating results are not in line with an assessment of adequate and/or if there is a significant deterioration in risk-adjusted capitalization,” AM Best added.
“Negative rating actions could also occur if AM Best’s perception of SWA’s ability and willingness to support TCA changes. Positive rating action could result if TCA’s level of operating performance demonstrates improvement over several years and results align more appropriately with peers assessed as strong.”