AM Best has affirmed the financial strength ratings of ‘A’ (excellent) and the long-term issuer credit ratings of “a” (excellent) of Vermont-domiciled Spirit Insurance Company and Cayman-Islands Radius Insurance Company. The outlook for the ratings is stable.
Spirit and Radius are captives owned by Texas-based energy multinational, Phillips 66, and are both managed by Marsh.
Spirit provides property damage, business interruption, construction all-risks, excess liability and employee medical reimbursement insurance for Phillips 66, its affiliates and subsidiaries’ domestic U.S. operations only, though it generally does not provide coverage for Texas-based risks.
Radius provides similar coverage to Phillips 66, its affiliate and subsidiaries’ non-U.S. risks in which Phillips 66 has ownership interests.
Spirit also provides terrorism coverage to its parent. Though relatively high on a gross basis, the terrorism exposure is heavily mitigated by reinsurance protection afforded by coverage under the federal Terrorism Risk Insurance Program Reauthorization Act, which expires in 2027.
As of 2022, premium and exposures for Radius decreased after removing UK property exposures from the captive.
Both captives have exposure to low frequency, high severity loss claims due to the sizable limits offered on their respective policies, introducing potential significant dependence on reinsurance protection.
Spirit and Radius each have the inherent benefits of financial flexibility and support as captive insurers of Phillips 66.
The captives’ loss experience has remained generally favourable due to the parent’s strong loss-control programme and relatively small number of material catastrophe losses.
Phillips 66 conducts periodic reviews of Spirit and Radius’ potential loss exposures through an industrial risks specialist.
“The ratings reflect Spirit and Radius’ balance sheet strength, which AM Best assesses as very strong, as well as each company’s adequate operating performance, neutral business profile and appropriate enterprise risk management,” AM Best said.