OLDWICK, N.J., Mar 21, 2014 (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 involved in these operations.

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 affiliates.

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 .

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SOURCE: A.M. Best Company

A.M. Best Company Alexander Sarfo, 908-439-2200, ext. 5779 Senior Financial Analyst [email protected] or Steven Chirico, CPA, 908-439-2200, ext. 5087 Assistant Vice President [email protected] or Rachelle Morrow, 908-439-2200, ext. 5378 Senior Manager, Public Relations [email protected] or Jim Peavy, 908-439-2200, ext. 5644 Assistant Vice President, Public Relations [email protected]