LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Ratings of A (Excellent) and the Long-Term Issuer Credit Ratings of “a” of Qatar Insurance Company Q.S.P.C. (QIC) (Qatar) and its subsidiary, Qatar Reinsurance Company Limited (Qatar Re) (Bermuda). The outlook of these Credit Ratings (ratings) is negative.
The ratings reflect QIC’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The negative outlooks reflect pressure on AM Best’s current operating performance assessment of strong due to poor performance in the group’s international operations (QIC Global) outside of the Middle East region. Since 2017, QICs Global’s results have been adversely impacted by catastrophe losses, changes to the U.K.’s Ogden discount rate and COVID-19 related losses in 2020. As a consequence, the group has produced a five-year (2015-2019) average combined ratio of 102%; AM Best expects the group to report a combined ratio in the range of 105% to 110% in 2020, driven by COVID-19 losses.
The pressure on QIC’s underwriting earnings highlight governance and underwriting control deficiencies in the group’s decision-making process. Although QIC’s ERM framework has improved in recent years, AM Best believes there is further development required in order for QIC to manage risk holistically at group level, rather than relying on the risk management teams of subsidiaries.
The group’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), and benefits from the company’s large capital base of QAR 7.7 billion (USD 2.1 billion). QIC’s financial flexibility has been highlighted by its ability to access capital and debt markets, most recently through the issue of USD 300 million of subordinated notes in 2020. Higher allocations to cash, deposits and fixed income in the group’s investment portfolio in recent years have improved its investment risk profile. At year-end 2019, these assets accounted for 83% of QIC’s investment portfolio.
QIC is exposed to credit risk through a QAR 953 million receivable from Markerstudy Group, which was due in April 2020. Whilst the group maintains sufficient capital to absorb a default on this loan, any impairment is likely to represent a material loss to earnings.
During 2019, QIC reported gross written premium (GWP) of QAR 12.8 billion (USD 3.5 billion), an increase of 2% on prior year. More than 75% of GWP is derived from QIC Global, which benefits from a geographically diversified multi-platform approach, including a Lloyd’s platform (Antares), a Bermuda reinsurer (Qatar Re) and carriers for primary insurance in Europe. QIC has a leading position in Qatar and a strong competitive position in the United Arab Emirates. While QIC’s business mix has been volatile in recent years, the group plans to focus on low volatility lines, with almost half of GWP emanating from motor insurance in the United Kingdom, Continental Europe and the Middle East.
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