NU Online News Service, June 21, 11:40 a.m. EDT
A.M. Best Co. has downgraded the financial strength rating (FSR) and issuer credit rating (ICR) of British Petroleum's captive insurer, Jupiter Insurance Limited, over concerns regarding the Deepwater Horizon oil spill in the Gulf of Mexico.
Oldwick, N.J.-based A.M. Best said it downgraded Jupiter's FSR to "A" from "A-plus" and downgraded the Guernsey-based captive's ICR to "a" from "aa-minus."
The outlook for both ratings remains negative.
A.M. Best said the downgrade reflects concerns over the oil spill's potential impact to BP.
Although BP has recently agreed to establish a $20 billion claims fund, A.M. Best said that, given the magnitude of the event, it is currently impossible to assess the ultimate financial liabilities and reputational damage to BP.
The rating agency added that the financial position of Jupiter itself is likely to remain strong following this incident. Although Jupiter has established loss reserves at its policy limit of $700 million, risk-adjusted capital still soundly supports the rating level, A.M. Best said.
The downgrade follows A.M. Best's June 3 revision of Jupiter's outlook to negative from stable.
BP said in a statement today, "The cost of the response to date amounts to approximately $2 billion, including the cost of the spill response, containment, relief well drilling, grants to the Gulf states, claims paid and federal costs."
On June 16, BP said, it announced an "agreed package of measures, including the creation of a $20 billion fund to satisfy certain obligations arising from the oil and gas spill. It is too early to quantify other potential costs and liabilities associated with the incident."
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