A M Best affirms QGIRC credit ratings

Global insurance rating agency A M Best has affirmed Qatar General Insurance & Reinsurance Company's (QGIRC) financial strength rating of "B++ (Good)" and long-term issuer credit rating of "bbb” (Good).The ratings reflect the insurer's consolidated balance sheet strength, which A M Best assesses as "very strong", as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).The company'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).A M Best projects the company’s prospective risk-adjusted capitalisation to remain at least at the very strong level, supported by internal capital generation.The balance sheet strength assessment benefits from the company's history of favourable reserve development.The balance sheet is highly concentrated, with just three real estate holdings accounting for over half of the company's investment portfolio, exposing it to significant capital volatility, the rating agency cautioned.Factors further offsetting balance sheet strength include high reinsurance dependence and borrowings of a generally short duration, which expose the company to refinancing risk.QGIRC’s earnings have been supported by a track record of adequate underwriting profitability, demonstrated by a five-year weighted average combined ratio of 99%. However, over the last six years (2017-22), QGIRC has reported cumulative unrealised investment losses of QR2.3bn, which have more than offset its profitable underwriting performance.The rating agency expects prospective operating results to be supported by the company’s increased focus on selective underwriting, along with steady commission income.QGIRC has implemented robust corrective actions since governance failures under the previous management team, which led to material retrospective write-offs recognised on QGIRC's real estate portfolio in 2019 and prior years.The ERM assessment considers the expectation that the new management team will continue to develop its risk management framework and risk culture. Furthermore, the assessment takes in to account the anticipated de-risking of the company’s balance sheet, through the sale of certain strategic real estate holdings.