A rating for Qatar Insurance affirmed
The international business of a global insurer, including its Bermuda reinsurer, has faced underwriting deficiencies and catastrophe losses in recent years, together with regulatory solvency breaches and governance issues, according to AM best.
It led the rating agency to question the company’s future credit ratings.
Best reported in a recent statement that it had affirmed the financial strength rating of A (Excellent) and the long-term issuer credit ratings of A (Excellent) of Qatar Insurance Company QSPC and its subsidiary, Bermudian-based Qatar Reinsurance Company Limited.
But it said the outlook of these credit ratings was negative.
The agency said the ratings reflected QIC’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
But the negative outlooks reflect pressure on AM Best’s currently assessed strong operating performance, due to poor underwriting performance in the group’s international operations, QIC Global, outside of the Middle East region.
Since 2017, QIC Global’s results have been impacted adversely by catastrophe losses, changes to the United Kingdom’s Ogden discount rate and Covid-19-related losses in 2020.
As a consequence, AM Best said, the group has produced a five-year (2016-2020) average combined ratio of 104 per cent.
The pressure on QIC’s underwriting earnings highlight governance and underwriting control deficiencies in the group’s decision-making process, AM Best said.
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.
Recent regulatory solvency breaches in global subsidiaries, which have since been resolved, have highlighted this requirement.
The group’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s capital adequacy ratio.
Other positive factors include good financial flexibility, a diversified investment portfolio, which is low risk by asset class and moderate reinsurance dependence.
Offsetting factors are uncertainty surrounding the quality of reserving, and the concentration of assets towards Qatar and Gulf Cooperation Council countries.
QIC recovered its $262 million loan balance due from MarkerStudy Group Limited during 2021, removing the credit risk associated with this asset.
In 2020, QIC reported gross written premium of $3.4 billion, an increase of one per cent over 2019.
Approximately 80 per cent of GWP is derived from QIC Global, which benefits from a geographically diversified multi-platform approach, including a Lloyd’s platform, Antares, Bermuda reinsurer Qatar Re and carriers for primary insurance in Europe.
AM Best said 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 has increased its focus on low volatility lines, with more than half of GWP emanating from motor insurance in the UK, Continental Europe and the Middle East.