What’s behind the negative outlook for QGIRC? | Insurance business America
The Qatari re/insurer is facing some problems in its portfolio
reinsurance
By Kenneth Araullo
While AM Best has affirmed the financial strength rating of B++ (Good) and the long-term issuer credit rating of ‘bbb’ (Good) for Qatar General Insurance & Reinsurance Company QPSC (QGIRC), the outlook for these ratings remains negative, the agency said.
The negative outlook suggests continued pressure on QGIRC’s ERM and operating performance ratings. The Company recorded significant unrealized losses on its concentrated real estate investment portfolio, resulting in net losses in three of the last five years (2019-2023).
Despite remedial measures to improve internal controls, processes and governance, AM Best considers the Company’s risk management capabilities in certain key risk areas to be not yet fully demonstrated.
AM Best forecasts that the company’s prospective risk-adjusted capitalization will continue to be very strong, supported by internal capital generation. However, the balance sheet is highly concentrated, with two real estate holdings accounting for more than a third of the investment portfolio, resulting in significant capital volatility.
According to the credit agency, this is reflected in the capital reduction of 27.2% in 2023 due to revaluations. Other factors that impact balance sheet strength include high reinsurance dependence and short-term borrowings, which expose the company to refinancing risk.
QGIRC has demonstrated adequate underwriting profitability and reported generally positive technical results. However, cumulative unrealized investment losses of QAR 2.4 billion over the past six years (2018-2023), including QAR 1.3 billion in 2023, have exceeded profitable underwriting performance.
AM Best expects future operating results to benefit from its focus on selective underwriting and reduced investment risk.
As governance failures under the previous leadership resulted in significant asset write-downs, QGIRC has taken strict corrective action. The ERM rating reflects AM Best’s expectation that the new management team will further improve the risk management framework and risk culture.
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2024-06-21 13:20:00
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