Best’s News & Research Service - May 20, 2022 11:22 AM (EDT)
AM Best Revises Outlooks to Positive for Dubai Insurance Company (PSC)
- May 20, 2022 11:22 AM (EDT)
London //BestWire// - AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Dubai Insurance Company (PSC) (DIC) (United Arab Emirates).
The Credit Ratings (ratings) reflect DIC’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.
The revision of the outlooks to positive reflects AM Best’s expectation that DIC will continue to enhance its market position and deliver strong underwriting results benefiting from the profitable growth of the Worker Protection Program (WPP) product, as well as the active development of new products through a DIC-led consortium.
DIC’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by strong organic capital generation. The assessment factors in the company’s sufficient liquidity and prudent reserving, which incorporates buffers over the actuarial best estimate. An offsetting factor in the balance sheet strength assessment is the company’s high dependence on reinsurance as demonstrated by a retention ratio of 24.0% in 2021. The associated counterparty credit risk is mitigated partially by the use of a panel of strong international reinsurers of high credit quality. The assessment also considers the material share of equity holdings in the investment portfolio and DIC’s exposure to changes in their valuation, which introduces potential volatility in capital through other comprehensive income.
The company has a track record of strong operating performance as demonstrated by an excellent five-year (2017-2021) weighted average combined ratio and return-on-equity (ROE) of 72.6% and 11.7%, respectively (as calculated by AM Best). In 2021, DIC reported a technical profit of AED 62.1 million, equating to an ROE of 14.0%. The earnings of the WPP have made a material contribution to the company’s technical results since its inception in 2018, aided by the product’s substantial premium growth, low loss ratio and significant inward reinsurance commissions. Furthermore, all other lines of DIC’s business were also profitable in 2021, although the market remained very competitive, with significant pressure on premium rates.
DIC has enhanced its market position successfully in a highly competitive market without compromising technical profitability in recent years. The incorporation of the WPP product has diversified DIC’s business mix, which historically was concentrated primarily in motor and medical lines in line with other domestic insurers.
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 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.