|[March 21, 2014]
A.M. Best Affirms Ratings of Palms Insurance Company, Limited
OLDWICK, N.J. --(Business Wire)--
A.M. Best has affirmed the financial strength rating of A
(Excellent) and issuer credit rating of "a" of Palms Insurance
Company, Limited (Palms) (George Town, Cayman Islands). The outlook
for both ratings remains stable.
The ratings reflect Palms' excellent risk-adjusted capitalization and
history of consistently strong operating performance, as well as the
captive's strong integration within the risk management structure of its
parent, NextEra Energy Capital Holdings, Inc. (NEECH). The ratings also
recognize Palms' history of maintaining sufficient capital and financial
resources to support its ongoing obligations.
Partially offsetting these positive rating factors are Palms' limited
market scope and high net loss potential stemming from a single, severe
occurrence relative to surplus. Nevertheless, this is somewhat mitigated
by the company's excellent loss history, favorable geographic spread of
risk and the history of support of Palms' strong surplus position by its
parent. Somewhat offsetting these positive rating factors are, despite
the fact that Palms depends on third parties for processing, servicing
and administration, the senior management of its ultimate parent, NextEra
Energy, Inc. (NEE) [NYSE: NEE], is intimately invlved in these
Palms is a single parent or pure captive insurer wholly owned by NEECH,
which in turn is wholly owned by NEE; hence, Palms insures select risks
for NEE. Palms accepts insurance risks only from NEE and its affiliates,
providing specialized direct and assumed property and casualty
coverages, workers' compensation, automobile liability and employers'
liability and property risk. Although Palms participates in a range of
coverages for very large risks, these risks are underwritten with tight
guidelines and significant loss control measures by the insured
Positive rating actions on Palms appear unlikely at this time. The
potential for future volatility is reflected in the current rating
level. Nonetheless, downward rating pressure could result from weakened
free cash flow, a decline in the company's liquidity levels, an increase
in underwriting leverage and/or outsized catastrophe or investment
losses in conjunction with a significant prolonged decline in
risk-adjusted capitalization. In addition, financial issues resulting in
rating pressure on NEECH and/or NEE could impact Palms' ratings.
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.
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Best's Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS
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