LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” of Qatar Islamic Insurance Company Q.S.C. (QIIC) (Qatar). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect QIIC’s track record of excellent operating performance, adequate combined risk-adjusted capitalisation (considering both shareholders’ and policyholders’ funds), and niche business profile as a successful takaful provider in the Qatar insurance market. Offsetting rating factors include limited enterprise risk management and a high concentration of illiquid assets within its investment portfolio.
QIIC adopts a combined takaful model, whereby the shareholders’ fund charges the policyholders’ fund a Wakala fee based on gross written premiums and a Muderaba fee based on investment income. QIIC’s ability to accumulate surpluses within the policyholders’ fund whilst regularly distributing surplus back to policyholders supports the sustainability of the takaful model.
The company’s combined risk-adjusted capitalisation remains adequate. While the company benefits from moderate underwriting leverage, capital requirements are largely driven by asset risk relating to the company’s concentrated portfolio, which is weighted towards domestic equities and real estate assets. The policyholders’ fund is sufficiently capitalised on a standalone basis, supported by QAR 110 million (USD 30 million) of retained surplus as at 30 September 2016.
QIIC has a track record of strong operating and technical profitability, highlighted by a five-year average combined ratio of 80%. During the first nine months of 2016, the company generated a net profit of QAR 50 million (USD 14 million). There has generally been a good balance of earnings between technical and investment income. Although the company has sustained unrealised losses on its equity portfolio over the past five years, its five-year (2011-2015) average investment return (including gains and losses) has been reasonable at 5.5%.
QIIC has a niche position in its domestic insurance market as a provider of Shari’a compliant products, and a strong reputation that is somewhat attributable to the company’s track record of distributing surpluses back to policyholders. QIIC’s gross written premium grew by 2.5% to QAR 225 million (USD 62 million) during the first three quarters of 2016, in comparison to the same period in 2015.
QIIC’s enterprise risk management is developing, and whilst the company’s track record of technical profitability illustrates good underwriting controls, investment decisions are made at the board level, which has led to volatility in investment results.
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