Best Affirms Heddington’s FInancial Strength
A.M. Best Co. this week affirmed the financial strength rating of ‘A’ [Excellent] and issuer credit rating of “a+” of Bermuda-based Heddington Insurance Limited, both with stable outlooks.
Best said the ratings reflect Heddington’s “superior capitalisation, consistently positive operating results and the role that it plays as a captive insurance company of Chevron Corporation.”
However, the rating agency also indicated that the rating factors “are partially offset by Heddington’s high net loss exposures, as the coverages provided tend to result in claims that are characterised as low frequency but high severity.
This is somewhat mitigated by the captive’s good loss history supported by strong investment income and parental support provided by high yield loans to affiliated companies.
Heddington has sufficient capital resources to meet its underwriting related obligations, as measured by Best’s Capital Adequacy Ratio [BCAR].”
Best also noted that the ratings are based on the consolidated results of Heddington.
“The ratings further recognise the company’s strong enterprise risk management controls and underwriting expertise, the loss controls included in the structuring of insurance coverages offered by Heddington, as well as the cost effective manner in which those services are delivered,” said Best in a statement.
“Heddington also gains from Chevron’s global scope, which provides it with a favorable geographic distribution of assumed risks. In its role as a captive insurer, Heddington, along with Iron Horse Insurance Company — another active Chevron captive — currently provides broad and competitive global insurance products for Chevron and its subsidiaries.
“The insurance needs of Chevron are supplied through these captive operations — where appropriate — and the commercial market.”
Best pointed out that “Heddington and the other Chevron captives provide comprehensive coverage above Chevron’s internal retentions, while Heddington’s reinsurance is placed through a corporate wide plan with the world’s leading providers of capacity, resulting in a diversified and balanced distribution of reinsurers.”
In conclusion Best said: “There is a small likelihood that positive rating actions could take place within the next 12 to 24 months based on Heddington’s stand-alone characteristics. However, negative rating actions may result from material loss of capital that does not support the ratings or the captive’s profile is diminished within Chevron.”
