AM Best Confirms Strong Ratings for Spirit and Radius Insurers

AM Best Affirms Financial Strength Ratings

AM Best has solidified the Financial Strength Rating of A (Excellent) along with Long-Term Issuer Credit Ratings of 'a' (Excellent) for both Spirit Insurance Company and Radius Insurance Company. This affirmation underscores a stable outlook for these entities, reflecting their robust performance in the insurance sector.

Understanding the Rated Companies

Spirit Insurance Company, based in Colchester, and Radius Insurance Company, located in the Cayman Islands, showcase strong balance sheets and commendable operating performances. AM Best assesses their financial positions as very strong, while also emphasizing their effective enterprise risk management practices.

Operational Alignment with Phillips 66

Both Spirit and Radius serve crucial roles within the broader structure of their parent company, Phillips 66 (NYSE: PSX). They operate as captive insurers, which provides them with essential financial flexibility and a supportive framework for ongoing operations. Their partnership is built on clear, aligned interests and plays a vital part in Phillips 66's comprehensive risk management approach.

Benefits of Captive Insurance

Operating as captives, these companies benefit from effective loss-control strategies employed by Phillips 66. Their loss experiences remain favorable, supported by rigorous assessments conducted through specialized industrial risk experts. Such proactive measures highlight their unwavering commitment to maintaining safety standards.

Insurance Products Offered

The underwriting focus of Spirit and Radius primarily encompasses property and liability insurance, with coverage extending to a range of activities. Spirit offers services including property damage, business interruption, and employee medical reimbursement but typically excludes coverage for Texas-based risks. Conversely, Radius covers similar territories pertaining to non-U.S. risks where Phillips 66 has vested ownership interests.

Adjustments Made in Premiums

As of recent years, the premium generation and coverage exposures for Radius experienced adjustments due to the removal of property exposures in the U.K. This strategy aids in streamlining their risk portfolios, ensuring they align more closely with current market dynamics.

Risk Management Protocols

Both companies are susceptible to low frequency yet high severity loss claims due to the significant limits associated with their policies, thus creating a degree of reliance on adequate reinsurance coverage. To further mitigate risks, Spirit extends terrorism coverage to Phillips 66, although this exposure is greatly controlled through established federal programs designed to reduce potential financial impacts.

The Impact of Reinsurance

Despite the considerable gross exposure rates related to terrorism, comprehensive reinsurance arrangements, including those outlined under the federal Terrorism Risk Insurance Program, play a crucial role in shielding the captives from extreme financial distress. Such plans are set to be evaluated as they near expiration in the coming years.

About AM Best

AM Best has carved a niche for itself as a leading credit rating agency, especially for alternative risk transfer entities. With over 200 vehicles rated internationally, it plays a critical role in guiding the stability and reliability of insurance options globally. For a thorough look into the latest Best’s Credit Ratings and data involving captive insurance markets, AM Best provides comprehensive resources.

Conclusion

In summary, the recent affirmation of ratings by AM Best highlights the strength and resilience of Spirit and Radius Insurance Companies. Their strategic alignment with Phillips 66 and effective risk management protocols position them favorably within the insurance landscape.

Frequently Asked Questions

What are the Credit Ratings of Spirit and Radius Insurance Companies?

The Credit Ratings affirmed by AM Best for both companies are an A (Excellent) for Financial Strength and 'a' (Excellent) for Long-Term Issuer Credit Ratings.

Who is the parent company of Spirit and Radius?

The parent company of Spirit and Radius Insurance Companies is Phillips 66, listed on the New York Stock Exchange as NYSE: PSX.

What kind of coverage do Spirit and Radius provide?

Spirit provides various property and liability insurances primarily to U.S. clients, while Radius covers similar risks for international operations associated with Phillips 66.

How does AM Best assess these companies?

AM Best evaluates their assessments based on balance sheet strength, operating performance, and overall enterprise risk management practices.

What is the relevance of the Terrorism Risk Insurance Program?

This federal program provides essential reinsurance protection, significantly reducing financial exposure to terrorism-related claims for Spirit Insurance Company.

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