A.M. Best affirms Doha Insurance Group’s rating with ‘stable’ outlook

Global insurance rating agency A.M. Best has affirmed Doha Insurance Group’s financial strength rating (FSR) of ‘A-’ (Excellent) and the long-term issuer credit rating of “a-” with “stable” outlook.

The ratings reflect the insurer’s balance sheet strength, which A.M. Best categorises as “very strong”, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).

It said ERM has improved materially over the past 18 months, as the company integrates a more formal risk management framework while simultaneously raising the quality of the internal control environment. A.M. Best expects the insurance group to continue to enhance its ERM capability.

The company’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), was assessed at the strongest level at year-end 2017. Capital requirements are driven largely by asset risk arising from the company’s investment portfolio, which is weighted toward domestic equities. However, Doha Insurance has an excellent liquidity position and a sufficient capital buffer to absorb volatility arising from these assets. Whilst its premium retention increased to 40% at year-end 2017 from 21% in 2013, the company still has a high reliance on reinsurers, it said, adding elevated levels of credit risk are mitigated through the use of a well-rated reinsurance panel. Healthy investment income, which has historically driven the majority of net earnings, is offset by fair value losses recognised in other comprehensive income but the core insurance operations in Doha continue to generate strong underwriting returns; however, volatility is introduced from its regional reinsurance operations, according to the rating agency. Consequently, the company’s combined ratio increased to 99% in 2017 from 89% in 2016. During the first half of 2018, the loss ratio improved to 59%.

“Going forward, A.M. Best expects underwriting results to stabilise through the use of increased reinsurance purchasing and improved risk selection,” it said.

The company has an established profile in Qatar’s insurance market, where it benefits from being one of the leading national insurance companies, and has a welldiversified underwriting portfolio, by line of business.

It benefits from a modest level of geographical diversification through its regional reinsurance division, which writes fire and engineering risks across the Middle East.