AM Best upgrades credit ratings of Qatar Islamic Insurance
Date
4/23/2021 11:17:11 PM
(MENAFN- Gulf Times) Global insurance credit rating agency AM Best has upgraded Qatar Islamic Insurance Company's (QIIC) financial strength rating to 'A- (Excellent)' from 'B++ (Good)'.
The rating agency also upgraded QIIC's long-term issuer credit rating to 'a- from 'bbb+. The outlook of these credit ratings has been revised to "stable" from "positive".
The ratings reflect insurer's balance sheet strength, which AM Best assesses as "very strong", as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
The rating upgrades reflect continued strengthening of QIIC's capital base through the retention of earnings as the company continues to demonstrate strong operating returns.
In 2020, capital and surplus grew by 4.5% to QR396mn (QR591mn including policyholders' fund). The insurance firm employs a hybrid takaful model, whereby the shareholders' fund charges the policyholders' fund (PHF) a ‘Wakala' fee based on gross written contributions (GWC) and a ‘Mudaraba' fee based on investment income.
The QIIC's ability to accumulate surpluses within the PHF, whilst regularly distributing surplus back to policyholders, supports the sustainability of the takaful model.
The risk cover provider's balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR).
"The group is less reliant on reinsurance compared with its regional peers, and the programme is placed with a well-rated reinsurance panel," it said.
The QIIC maintains sufficient liquidity to support its insurance operations; however, it is exposed to illiquid assets in the form of real estate and investments in associates, which accounted for approximately 51% of total investments as at year-end 2020.
The rating agency expects the group to continue to move into alignment with regulatory requirements with regard to its investment concentrations.
The insurer has a track record of strong operating and technical profitability, continuing to generate solid net profits in 2020 of QR76mn, equivalent to a return on equity of 13.6%.
"The profitability is underpinned by solid and stable underwriting performance, highlighted by a strong five-year average (2016-20) combined ratio of 71.6%," the rating agency said.
The QIIC is concentrated geographically, writing all of its business in its domestic market, where it maintains a" niche" market position as an established provider of Shariah-compliant products, it said.
The group's strong reputation in Qatar benefits from its track record of distributing surpluses back to its policyholders. Moreover, it is a member of the national insurance consortium, which provides QIIC with access to large government infrastructure contracts.
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