AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” (Excellent) of Blue Whale Re Ltd. (Blue Whale) (Burlington, VT). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Blue Whale’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The ratings also reflect Blue Whale’s strategic position as the captive insurer for Pfizer Inc. (Pfizer) [NYSE: PFE], a leading global pharmaceutical company. As Blue Whale insures or reinsures Pfizer’s global property exposures, it plays an important role in Pfizer’s overall ERM and assumes a critical role in protecting the Pfizer enterprise’s assets.

The stable outlooks reflect AM Best’s view that the company’s operations will continue to generate operating results that engender supportive capitalization for the ratings.

Blue Whale’s capitalization is very strong, albeit reliant on its parent. It operates at conservative underwriting leverage levels; however, it provides coverages with extremely large limits, and its gross exposures per loss occurrence are elevated. Although Blue Whale benefits from reinsurance protection, it is heavily dependent on reinsurance, with very substantial net retentions. Its reinsurance is provided by a large panel of reinsurers that provide significant capacity. AM Best takes into consideration the quality of the reinsurers, and the substantial financial resources and support available to the captive as part of the Pfizer enterprise.

Blue Whale’s operating results continue to be strong, digesting infrequent substantial losses in line with its mission. The company has adjusted premium for hard market conditions offset by the company’s decreasing property insurance requirements following Pfizer’s divestiture of Upjohn Inc., including the Caribbean production and warehouse facilities.

Due to the nature of the relationship between Blue Whale and Pfizer, changes in AM Best’s perception of Pfizer’s ability and/or willingness to support Blue Whale can impact Blue Whale’s ratings. Pfizer’s market-based credit risk measures indicate general strength and take into account the company’s strategic shift toward newer pharmaceuticals, with Pfizer having completed divestiture of its over-the-counter pharmaceutical business and contribution of its mature pharmaceuticals going off patent to a joint venture. Since the emergence of COVID-19, Pfizer also has increased usage of Blue Whale by adding incremental product liability coverage (normally wholly retained by the parent) for a portion of its vaccine-related products distributed in several developing countries as a ‘belt and suspenders’ precaution beyond its required sovereign indemnifications. Based on the parent’s corporate strategy, and Blue Whale’s current reinsurance program, Blue Whale appears well-positioned to continue to address Pfizer’s insurance needs.

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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