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.
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