AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Park Assurance Company (Park) (Colchester, VT). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Park’s balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
Park’s strongest risk-adjusted capital position reflects its conservative loss reserving practices and favorable development trends, along with its conservative investment portfolio and strong liquidity measures. The ratings further reflect Park’s sophisticated risk management strategy and practices, experienced management team and its integral role as a single-parent captive of JPMorgan Chase Holdings, LLC, which is a subsidiary of JPMorgan Chase & Co. (JPMorgan Chase) [NYSE: JPM], a leading global financial services group.
Partially offsetting these factors are the tempered surplus growth as a result of capital returned to its parent in the form of periodic stockholder dividends and its large underwriting risk appetite on a gross basis. The potential credit risk associated with Park’s extensive use of reinsurance, which management utilizes to mitigate its exposure to oversized losses on substantially valued insured locations, is also an offsetting factor.
Park provides JPMorgan Chase with global property coverages, including terrorism, as well as bankers blanket bond, and prior to 2017, general liability coverage. These coverages are key components of JPMorgan Chase’s risk management strategy, and Park benefits from the explicit support of the group’s significant financial resources and extensive professional resources. Park’s business profile is considered limited due to its product concentration risk, offering limited lines of coverage on a net basis.
Park is well-capitalized through retained earnings as the captive has reported consistently favorable pure loss ratios in combination with its low-cost underwriting expense structure to produce favorable operating earnings year after year that have outperformed the commercial property composite by a wide margin. Despite the level of capitalization, the captive is reliant on the protection afforded by the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA), and while the TRIPRA program offers significant protection from terrorism losses, the net impact on Park still could be burdensome. Nevertheless, AM Best recognizes the low probability of such extreme events and the support available to Park as a single-parent captive of JPMorgan Chase.
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.
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Senior Financial Analyst
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