AM Best Affirms Credit Ratings of Palms Insurance Company, Limited

Business Wire

2 days ago

BUSINESS WIRE)-- AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of 'a' (Excellent) of Palms Insurance Company, Limited (Palms) (George Town, Cayman Islands). Concurrently, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of 'a-' (Excellent) of Palms Specialty Insurance Company, Inc. (Palms Specialty) (Delaware). The outlook of these Credit Ratings (ratings) is stable.
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.
Both companies are wholly owned by NextEra Energy Capital Holdings, Inc. (NEECH), which, in turn, is wholly owned by NextEra Energy, Inc. (NextEra) [NYSE: NEE]. Palms is a single-parent captive, which underwrites the insurance risks of NextEra and its affiliates, providing specialized direct and assumed property, casualty, workers' compensation, automobile liability and employers' liability coverages. Palms Specialty, formed in 2022, is a specialty insurer focusing on U.S. excess and surplus lines accounts, providing coverage for specialty property, professional lines and other specialty lines with manageable gross limits within the risk management structure of its parent.
The balance sheet strength assessment of strongest for Palms is supported through its strongest level of risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR). In addition, Palms has grown its surplus in each of 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 AM Best's captive composite. Palms continues to generate favorable underwriting results and benefits from its low underwriting expense structure as a single parent captive.
The very strong balance sheet assessment for Palms Specialty is based on its strongest level of risk-adjusted capitalization, as measured by BCAR. 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 favorable 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 balance sheet strength or operating performance materially differ to the downside from its initial business plan.
Palms and Palms Specialty both benefit from the parent company's established and tested ERM framework and processes that continue to evolve with further improvements tailored to both companies. The ratings also reflect the role of Palms and Palms Specialty within the risk management structure of its parent company.
AM 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.
This press release relates to Credit Ratings that have been published on AM Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best's Credit Ratings, Best's Performance Assessments, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments.