Best Rates GE, Conoco/Phillips Captives, Electric and Sooner ‘A’

June 2, 2009

A.M. Best Co. has affirmed the financial strength ratings of ‘A’ (Excellent) and issuer credit ratings of “a” of Electric Insurance Group and its members – Electric Insurance Company (Beverly, MA), Electric Insurance Ireland Ltd, (Dublin, Ireland) and Electric Lloyd’s of Texas (Dallas, TX). The outlook for all ratings is stable. Best said: “These ratings reflect Electric Insurance Group’s solid capitalization, sustained operating profitability and the value added commercial insurance services that the group provides General Electric Company (GE). The ratings also recognize the group’s customer service commitment, low cost operating structure, e-commerce initiatives and prudent catastrophe management strategy. Partially offsetting these positive rating factors are Electric Insurance Group’s adverse loss reserve development and the limitation of its commercial lines business to one policyholder. Although adverse loss reserve development in commercial lines has been recorded consistently, these lines are rated retrospectively. Thus, while profit potential is limited, risk also is reduced.

A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating of “a” of Vermont captive Sooner Insurance Company with stable outlooks. “The ratings are based on Sooner’s excellent capitalization, history of profitable operating results and the position it holds as the captive insurer for its ultimate parent, ConocoPhillips,” Best explained. “The ratings also consider the level of commitment on the part of its parent, whose management incorporates Sooner as a core element in its overall risk management program. Partially offsetting these positive rating factors are the captive’s exposure to large losses due to the high limits offered on its policies and the resulting significant dependence on reinsurance protection. In addition Best noted that “Sooner has a history of strong underwriting results and operating returns. Its loss experience has remained favorable due in part to its parent’s strong loss control programs. ConocoPhillips’ risk management conducts periodic reviews of its potential loss exposures through a specialist in industrial risks. Based on this analysis, a single occurrence could result in a large loss that approaches Sooner’s treaty limits. Nonetheless, Sooner has the capital to fund claims in the event of a reinsurance recovery problem and it participates in the U.S. federal program for terrorism coverage, the Terrorism Risk Insurance Program Reauthorization Act of 2007. Although the majority of Sooner’s capital is loaned to its parent, there is limited counterparty risk due to the affiliation with ConocoPhillips, and ConocoPhillips has a strong balance sheet and a history of favorable earnings. Further, the parent is required to fund annually the loan from its captive.”

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