AM Best Confirms Qatar General Insurance & Reinsurance Company QPSC Credit Ratings

LONDON–(BUSINESS WIRE)–AM Best Affirmed Qatar General Insurance & Reinsurance Company QPSC (QGIRC) (Qatar) financial strength rating of B++ (good) and issuer long-term credit rating of “bbb” (good). The outlook for these credit ratings (ratings) is negative.

The ratings reflect the strength of QGIRC’s consolidated balance sheet, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate management of business risks.

The negative outlook reflects concerns over the adequacy of QGIRC’s risk management and internal controls following the regulatory solvency breach in 2020 by its subsidiary, General Takaful Company QCSC, and asset impairments noted in 2019 and before. AM Best notes that the QGIRC has taken corrective measures to strengthen internal controls, processes and governance; however, these are currently untested.

QGIRC’s balance sheet strength assessment is underpinned by risk-adjusted capitalization at a very high level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects the company’s risk-adjusted forward capitalization to remain at least at a very high level, supported by internal capital generation. The balance sheet strength assessment benefits from QGIRC’s favorable reserve development history and adequate liquidity to cover its net insurance liabilities. However, QGIRC has a highly concentrated investment portfolio, with just three properties accounting for more than half of the company’s total investments, exposing the balance sheet to significant potential capital volatility. Other factors offsetting the strength of the balance sheet include the company’s heavy reliance on reinsurance and borrowings of 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, over the past five years, QGIRC has incurred unrealized investment losses totaling QAR 1.7 billion (USD 0.5 billion), which more than offset technical profits over this period. These fair value losses were mainly due to the three aforementioned real estate investments. AM Best expects forward-looking operating results to be supported by the company’s increased focus on selective underwriting, as well as stable commission income.

QGIRC has a leading position in the Qatar market, where it ranks among the top three listed insurance companies in terms of gross written premiums. While QGIRC’s business volume is moderately diversified by industry on a gross basis, this is partially offset by a focus on automotive on a net basis and its geographic focus on the Qatar market.

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