Best’s News & Research Service - August 27, 2015 09:06 AM (EDT)
A.M. Best Affirms Ratings of Doha Insurance Company Q.S.C.
- August 27, 2015 09:06 AM (EDT)
London //BestWire// - A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a-" of Doha Insurance Company Q.S.C. (DIC) (Qatar). The outlook for both ratings remains stable.
The ratings reflect DIC's robust risk-adjusted capitalisation, strong position within the Qatari insurance market and good operating performance. Offsetting rating factors are its developing enterprise risk management framework and execution risk associated with the company's planned expansion strategy.
DIC maintains superior risk-adjusted capitalisation, benefiting from low underwriting leverage and a strong reinsurance panel to support the high outward reinsurance cessations on commercial risks. Capital requirements are largely driven by DIC's investment profile, which is weighted toward equity and real estate assets. DIC's capital position was further bolstered in the first half of 2014 following a rights issue, increasing shareholders' paid-up capital to QR 500 million (USD 137 million) from QR 257 million (USD 71 million). A.M. Best expects the proceeds from the company's rights issue to be used to support DIC's regional growth strategy and increases in premium retention. A.M. Best expects DIC's capitalisation to remain strong through good internal capital generation and by maintaining a sufficient buffer for strategic initiatives over the next few years.
DIC has established a strong franchise within the domestic market, writing gross revenues of QR 533 million (USD 147 million) in 2014. The company has a well-diversified non-life portfolio, with low net retention across commercial lines. The high reinsurance dependence exposes DIC to increased credit risk, which is partially mitigated by a panel of well-rated reinsurers. DIC has demonstrated a good track record of technical profitability, producing solid combined ratios below 85% over the past five years and a five-year average return on equity of approximately 13%.
In 2015, the company will expand its regional presence by writing inward facultative business, utilising its presence in the Dubai International Financial Centre. Whilst this new expansion strategy into geographic regions entails a high level execution risk, it is mitigated by the experience of the senior management hired to run this division.
At present, the company operates a silo approach to risk management, mainly managing underwriting and credit risks independently. Whilst DIC's good track record of profitability is indicative of strong underwriting processes and controls, the company requires further development toward an enterprise-wide risk management framework that should integrate and embed all risks associated with the company's operation. This is particularly important given DIC's changing profile and strategic initiatives.
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
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