AM Best has downgraded the credit ratings of Qatar Insurance Company Q.S.P.C. (QIC) , and its subsidiary Antares Re. The outlook of these ratings has been revised to stable from negative.
The rating agency said it was switching the Financial Strength Rating to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a-” (Excellent) from “a” (Excellent).
According to AM Best the ratings reflect QIC’s balance sheet strength, which it assessed as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
“The downgrades reflect a revision in AM Best’s assessment of QIC’s operating performance to adequate from strong,” said the rating agency. “Underwriting results have been unprofitable and volatile in recent years, evidenced by a five-year (2017-2021) weighted average combined ratio of 105% with a standard deviation of 5%.
It added: “While QIC has generally been profitable over the period, AM Best considers that the group’s overall results are no longer supportive of a strong operating performance assessment.”
AM Best highlighted that 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 (BCAR), and is supported by good financial flexibility, a conservative investment portfolio by asset class and low reinsurance dependence.
“The concentration of QIC’s assets towards Qatar and Gulf Cooperation Council countries is an offsetting factor,” said the rating agency. “This is despite the vast majority of the group’s business being sourced from the United Kingdom, Europe and Bermuda.”
It added: “Furthermore, QIC is developing, but currently lacks, a consistent group-wide approach to reserving. Reserves are held at the best estimate, with limited buffers to absorb volatility.”
In 2021, QIC reported a GWP of $3.5bn, an increase of 4% over 2020. Approximately 80% of GWP is derived from Antares Global, which was previously Qatar Global. The rebranding was announced on September 2022.
Antares, as QIC’s international division, benefits from a geographically diversified multi-platform approach, including a Lloyd’s platform, a Bermuda reinsurer and carriers in Europe. QIC has a leading position in Qatar and a robust foothold in the United Arab Emirates market, though these markets comprise a relatively small proportion of overall group revenue.
AM Best concluded: “QIC’s business mix has been volatile in recent years, with a growing focus on motor insurance which exceeded 50% of consolidated GWP in 2021. However, the group’s recent announcement stating its intention to divest from its Gibraltar-based carriers – which largely underwrite U.K. motor business – will likely halt this trend and result in a decline of motor premium over the medium-to-long term.”
