AM Best has opted to maintain a negative outlook on the credit ratings of Qatar General Insurance & Reinsurance Company QPSC (QGIRC) (Qatar).
The rating agency explained that the outlook reflects 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.
However, analysts did note that QGIRC has taken remedial actions to strengthen internal controls, processes and governance, although these currently remain untested.
AM Best also affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of the company, citing good balance sheet strength, adequate operating performance, limited business profile and appropriate enterprise risk management.
Analysts project the QGIRC’s prospective risk-adjusted capitalisation to remain at least at the very strong level, supported by internal capital generation, although they noted its highly concentrated investment portfolio does expose 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 but has reported unrealised investment losses totaling QAR 1.7 billion (USD 0.5 billion), which more than offset underwriting profits over this period.
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.
