AM Best Affirms Credit Ratings of Qatar General Insurance & Reinsurance Company QPSC
LONDON--(BUSINESS WIRE)-- AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of Qatar General Insurance & Reinsurance Company QPSC (QGIRC) (Qatar). The outlook of these Credit Ratings (ratings) is negative.
The ratings reflect QGIRC’s consolidated balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
The negative outlooks reflect concerns regarding the adequacy of QGIRC's risk management and internal controls following the regulatory solvency breach in 2020 by its subsidiary, General Takaful Company Q.C.S.C., and asset impairments recognised in 2019 and prior. AM Best notes that QGIRC has taken remedial actions to strengthen internal controls, processes and governance; however, these are currently untested.
QGIRC’s balance sheet strength assessment is underpinned by risk-adjusted capitalisation at the very strong level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best projects the company’s prospective risk-adjusted capitalisation to remain at least at the very strong level, supported by internal capital generation. The balance sheet strength assessment benefits from QGIRC's history of favourable reserve development and adequate liquidity to cover its net insurance liabilities. However, QGIRC has a highly concentrated investment portfolio, with just three real estate holdings accounting for over half of the company’s total investments, exposing the balance sheet to significant potential capital volatility. Further offsetting balance sheet strength factors include the company’s high reinsurance dependence and borrowings of a generally short duration, which expose the company to refinancing risk.
QGIRC has a track record of adequate underwriting profitability, demonstrated by a five-year (2017-2021) weighted average combined ratio of 99%. However, throughout the past five years, QGIRC has reported unrealised investment losses totaling QAR 1.7 billion (USD 0.5 billion), which more than offset underwriting profits over this period. These fair value losses primarily emanated from the three aforementioned real estate investments. AM Best expects prospective operating results to be supported by the company’s increased focus on selective underwriting, along with steady commission income.
QGIRC has a leading market position in Qatar, where it ranks among the three largest listed insurance companies by gross written premium. While QGIRC’s book of business is moderately diversified by line of business on a gross basis, this is partially offset by a concentration in motor on a net basis and its geographic concentration in Qatar’s market.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.