AM Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a+” (Excellent) for Blue Whale Re Ltd. (Blue Whale), based in Burlington, Vt. The outlook for both credit ratings is stable.
The ratings are based on Blue Whale’s balance sheet strength, which AM Best categorizes as very strong, as well as the company’s operating performance, business profile, and enterprise risk management (ERM). AM Best assesses the company’s operating performance as strong and its business profile as neutral, with ERM considered appropriate for its operations.
Blue Whale serves as the sole captive insurer for Pfizer Inc, a global pharmaceutical company. The captive insures or reinsures Pfizer’s global property exposures and plays a central role in Pfizer’s ERM framework by protecting the company’s assets.
Blue Whale maintains substantial retentions across its insurance programs, supplementing the reinsurance capacity arranged by Pfizer.
In response to challenging market conditions, Blue Whale has participated in small portions of its catastrophe tower, aiming to create greater economic efficiency for Pfizer. The captive also extends capacity for cyber liability coverage when market pricing increases, enabling Pfizer to retain critical coverage without relying solely on external markets.
Blue Whale’s underwriting portfolio is structured to cover low-frequency, high-severity exposures, and despite the nature of these risks, the company has maintained strong operating performance. Loss and expense ratios have stayed favorable compared to industry peers, even as broader insurance markets have faced volatility.
The performance of Blue Whale is reflective of a wider trend in the captive insurance sector. The market has seen significant growth, with direct premiums written by rated captives rising by 21% in 2022, marking the largest annual increase in a decade.
The expansion of the captive sector has been attributed to companies seeking greater control over their risk financing strategies amid tighter capacity and higher pricing in traditional insurance markets.
While the market for captives continues to expand, regulatory scrutiny has also increased. In January 2024, the Internal Revenue Service finalized new regulations targeting captive insurance arrangements, particularly those electing under IRC Section 831(b). The rules are designed to address concerns about potential tax abuses in micro-captives, and they are prompting some firms to reassess the structure of their captive programs to ensure compliance with evolving federal requirements.
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