AM Best has affirmed the financial strength rating of A (excellent) and the long-term issuer credit rating of “a” (excellent) of Cayman Islands-domiciled Palms Insurance Company limited (Palms).
The agency has also affirmed the FSR of A- (excellent) and the long-term ICR of “a-” (excellent) of Delaware-domiciled Palms Specialty Insurance Company, Inc. The outlook for the ratings is stable.
Both companies are owned by NextEra Energy Capital Holdings (NEECH), which, in turn, is owned by NextEra Energy.
Palms is a single parent captive, which underwrites insurance risks of NextEra and its affiliates, providing specialised direct and assumed property, casualty, workers’ compensation, automobile liability and employers’ liability coverages.
Palms Specialty, formed in 2022, is a specialty insurer focusing on US excess and surplus lines accounts, providing coverage for specialty property, professional lines and other specialty lines.
The ratings of Palms reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The ratings of Palms Specialty reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM.
The balance sheet assessment of “strongest” for Palms is supported through its strongest level of risk-adjusted capitalisation, as measured by Best’s capital adequacy ratio (BCAR).
Palms has grown its surplus each year during the past five years through organic growth, allowing the captive to maintain sufficient capital in supporting its ongoing obligations.
The adequate operating performance assessment reflects a five-year average for both combined and operating ratios that outperform the captive composite.
Palms continues to generate favourable underwriting results and benefits from its low underwriting expense structure as a single parent captive.
AM Best expects that Palms Specialty will continue to maintain supportive risk-adjusted capital levels throughout its start-up phase.
The adequate operating performance assessment is based on the company’s favourable operating ratio since inception, in addition to its clearly defined business plan and income statement projections that contemplate a level of implementation and execution risk for a newly formed entity.
AM Best views Palms Specialty’s business profile as limited, given the execution risk associated with a start-up entity and the degree of competition in its selected market.
“Negative rating action could occur if Palms Specialty’s actual balance sheet strength or operating performance materially differ to the downside from its initial business plan,” AM Best said.
