Stellar is the captive insurer of Saudi state owned oil company, Saudi Arabian Oil Company (Saudi Aramco) and provides financial risk transfer solutions for risks emanating from Saudi Aramco operations.
According to A.M. Best, the ratings reflect Stellar’s risk-adjusted capitalisation, very strong operating results and its strategic importance to Saudi Aramco as a risk management tool.
The ratings also take into account the credit profile of Saudi Arabia.
A.M. Best said: “Stellar benefits from excellent risk-adjusted capitalisation, which is supported by strong internal capital generation, low underwriting leverage and a comprehensive reinsurance programme.”
The rating agency added: “Saudi Aramco has strengthened Stellar’s capital position and enhanced its underwriting capacity by allowing the captive to retain all profits generated since its incorporation in 2001.”
The captive’s track record of very strong operating performance is primarily driven by robust underwriting results, as demonstrated by a five-year average combined ratio of 32 percent.
Prospective performance remains subject to volatility due to the captive’s exposure to high severity, low frequency losses in its energy programme, explained A.M. Best.
However, it suggested that the peak risks would be partly mitigated by its extensive reinsurance programme, which is placed with financially strong reinsurers.