Best’s News & Research Service - April 27, 2022 10:11 AM (EDT)
AM Best Affirms Credit Ratings of Qatar Islamic Insurance Group Q.P.S.C.
- April 27, 2022 10:11 AM (EDT)
London //BestWire// - AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Qatar Islamic Insurance Group Q.P.S.C. (QIIG) (Qatar). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect QIIG’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.
QIIG 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. QIIG’s ability to accumulate surpluses within the PHF, whilst regularly distributing surplus back to policyholders, supports the sustainability of its takaful model.
QIIG’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which was at the strongest level at year-end 2021, as measured by Best’s Capital Adequacy Ratio (BCAR), and is expected to remain at the strongest level over the medium term. Supporting the balance sheet strength assessment is QIIG’s consistent demonstration of internal capital generation. Capital and surplus grew by 7.3% in 2021 to QAR 424.8 million (USD 117.5 million) (10.3% growth when including the policyholders’ fund to QAR 652.3 million [USD 180.5 million]). While QIIG maintains sufficient liquidity to support its insurance operations, it has material holdings of illiquid assets in the form of real estate and investments in associates, which accounted for approximately 45% of its total investments as at year-end 2021. QIIG is moderately dependent on reinsurance, as the group cedes a high proportion of its large commercial risks.
QIIG reported a net profit of QAR 80.1 million (USD 22.2 million) in 2021, equivalent to a return on equity of 12.9%, demonstrating its ability to generate strong operating returns. Profitability is driven mainly by QIIG’s strong and stable technical results, demonstrated by a five-year (2017-2021) weighted average combined ratio of 66.7%. QIIG’s investment yields have been modest in recent years, driven by fair value losses arising on real estate and the impairment of investments in associates.
QIIG holds a niche position within its domestic insurance market, as an established provider of Shari’a-compliant products. In 2021, QIIG reported a 7% increase in contributions compared with 2020, writing GWC of QAR 428.6 million (USD 118.6 million). The group’s operations are concentrated in Qatar, where it maintains a strong reputation benefiting from its track record of distributing surpluses back to its policyholders. Moreover, the group is a member of the National Insurance Consortium, which provides QIIG with access to large government infrastructure contracts.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.