A.M. Best Affirms Credit Ratings of Spirit Insurance Company and Radius Insurance Company

A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of “a” of Spirit Insurance Company (Spirit) (Burlington, VT) and Radius Insurance Company (Radius) (Cayman Islands). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Spirit and Radius’ balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The balance sheet strength is supported by risk-adjusted capitalization being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), consistently favorable loss development and high liquidity. Business is written separately by Spirit and Radius, and each company has a history of strong underwriting results and operating returns, with most return metrics outpacing the composite.

The business profile assessment reflects the position they hold as the captive insurers for their ultimate parent, Phillips 66 [NYSE: PSX], whose management incorporates Spirit and Radius as core elements in its overall risk management program. The captives’ loss experience has remained favorable due in part to a lack of material catastrophic events and the parent’s strong loss control program. Phillips 66 conducts periodic reviews of Spirit and Radius’ potential loss exposures through an industrial risks specialist.

The captives’ underwriting risks largely consist of onshore and offshore property and liability business. Spirit provides property damage, business interruption and excess liability insurance to Phillips 66, and its affiliates and subsidiaries related to domestic U.S. operations only; however, Spirit does not provide coverage for Texas-based risks. Radius provides similar coverage (property damage, business interruption, excess liability), as well as cargo insurance to Phillips 66 and affiliates, and subsidiaries related to non-U.S. risks in which Phillips 66 has ownership interests.

Partially offsetting rating factors are Spirit and Radius’ exposure to large losses due to the limits offered on their respective policies and their significant dependence on reinsurance protection. In addition, Spirit’s terrorism risk exposure remains relatively high on a gross basis. Although the majority of Spirit’s capital is loaned to its parent, there is limited counterparty risk due to the affiliation of the two companies and the alignment of interests. Additionally, Spirit provides terrorism coverage to its parent. While terrorism risk exposure remains relatively high on a gross basis, concerns are mitigated by reinsurance protection afforded by the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA). However, due to the temporary nature of TRIPRA, A.M. Best will continue to monitor the company’s gross terrorism risk exposure over time as it relates to the company’s risk management practices and overall capacity.

A.M. 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 A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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A.M. Best
Alexander Sarfo
Senior Financial Analyst
+1 908 439 2200, ext. 5779
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Susan Molineux
Associate Director
+1 908 439 2200, ext. 5829
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or
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
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Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
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