LONDON–(BUSINESS WIRE)–A.M. Best has affirmed the Financial Strength Rating of B++(Good) and the Long-Term Issuer Credit Rating of “bbb+” of QatarIslamic Insurance Company Q.S.C. (QIIC) (Qatar). The outlook ofthese Credit Ratings (ratings) is stable.
The ratings reflect QIIC’s track record of excellent operatingperformance, adequate combined risk-adjusted capitalisation (consideringboth shareholders’ and policyholders’ funds), and niche business profileas a successful takaful provider in the Qatar insurance market.Offsetting rating factors include limited enterprise risk management anda high concentration of illiquid assets within its investment portfolio.
QIIC adopts a combined takaful model, whereby the shareholders’ fundcharges the policyholders’ fund a Wakala fee based on gross writtenpremiums and a Muderaba fee based on investment income. QIIC’s abilityto accumulate surpluses within the policyholders’ fund whilst regularlydistributing surplus back to policyholders supports the sustainabilityof the takaful model.
The company’s combined risk-adjusted capitalisation remains adequate.While the company benefits from moderate underwriting leverage, capitalrequirements are largely driven by asset risk relating to the company’sconcentrated portfolio, which is weighted towards domestic equities andreal estate assets. The policyholders’ fund is sufficiently capitalisedon a standalone basis, supported by QAR 110 million (USD 30 million) ofretained surplus as at 30 September 2016.
QIIC has a track record of strong operating and technical profitability,highlighted by a five-year average combined ratio of 80%. During thefirst nine months of 2016, the company generated a net profit of QAR 50million (USD 14 million). There has generally been a good balance ofearnings between technical and investment income. Although the companyhas sustained unrealised losses on its equity portfolio over the pastfive years, its five-year (2011-2015) average investment return(including gains and losses) has been reasonable at 5.5%.
QIIC has a niche position in its domestic insurance market as a providerof Shari’a compliant products, and a strong reputation that is somewhatattributable to the company’s track record of distributing surplusesback to policyholders. QIIC’s gross written premium grew by 2.5% to QAR225 million (USD 62 million) during the first three quarters of 2016, incomparison to the same period in 2015.
QIIC’s enterprise risk management is developing, and whilst thecompany’s track record of technical profitability illustrates goodunderwriting controls, investment decisions are made at the board level,which has led to volatility in investment results.
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