The earnings of Qatar General Insurance & Reinsurance Company (QGIRC) have been supported by a track record of adequate underwriting profitability, with the company generally reporting positive technical results, says AM Best.
However, over the past six years (2018-2023), QGIRC has reported cumulative unrealised investment losses of QAR2.4bn($659m), of which QAR1.3bn was incurred in 2023, which have more than offset its profitable underwriting performance. AM Best expects prospective operating results to be supported by the company’s increased focus on selective underwriting and a reduction in investment risk.
Ratings affirmed; outlook negative
AM Best has affirmed QGIRC’s Financial Strength Rating of ‘B++’ (Good) and the Long-Term Issuer Credit Rating of ‘bbb’ (Good). The outlook of these credit ratings is negative.
The ratings reflect QGIRC’s consolidated balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The negative outlooks reflect continued pressure on QGIRC’s ERM and operating performance assessments. The company has reported material unrealised losses arising from its concentrated real estate investment portfolio, which have resulted in it reporting net losses in three of the past five years (2019-2023). Additionally, whilst QGIRC has taken remedial actions to strengthen internal controls, processes and governance, AM Best views the company’s risk management capabilities in certain key risk areas as not yet time-tested.
Balance sheet strength
QGIRC’s balance sheet strength assessment is underpinned by risk-adjusted capitalisation at the very strong level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best projects the company’s prospective risk-adjusted capitalisation to remain at least at the very strong level, supported by internal capital generation. QGIRC’s balance sheet is highly concentrated, with just two real estate holdings accounting for over one third of the company’s investment portfolio, exposing it to significant capital volatility, which is evident by the 27.2% capital reduction in 2023 due to revaluations. Further offsetting balance sheet strength factors include QGIRC’s high reinsurance dependence and borrowings of generally short duration, which expose the company to refinancing risk.
ERM
QGIRC has implemented robust corrective actions since governance failures under the previous management team, which contributed to material write-downs in asset values in recent years. However, the ERM assessment considers AM Best’s expectation that the new management team will continue to develop its risk management framework and risk culture.