What's behind the negative outlook for QGIRC?

Qatari re/insurer facing some issues in its portfolio

What's behind the negative outlook for QGIRC?


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) of Qatar, the outlook for these ratings remains negative, the agency said.

The negative outlooks indicate ongoing pressure on QGIRC’s ERM and operating performance assessments. The company has experienced significant unrealized losses from its concentrated real estate investment portfolio, resulting in net losses in three of the past five years (2019-2023).

Despite remedial actions to improve internal controls, processes, and governance, AM Best views the company’s risk management capabilities in certain key risk areas as not yet fully proven.

AM Best projects the company’s prospective risk-adjusted capitalization to remain very strong, bolstered by internal capital generation. However, the balance sheet is highly concentrated, with two real estate holdings making up over one third of the investment portfolio, leading to significant capital volatility.

The credit agency said that this is evident in the 27.2% capital reduction in 2023 due to revaluations. Other factors affecting balance sheet strength include high reinsurance dependence and borrowings of short duration, which expose the company to refinancing risk.

QGIRC has demonstrated adequate underwriting profitability, generally reporting positive technical results. However, cumulative unrealized investment losses of QAR2.4 billion over the past six years (2018-2023), including QAR1.3 billion in 2023, have outweighed profitable underwriting performance.

AM Best expects future operating results to benefit from a focus on selective underwriting and reduced investment risk.

Since governance failures under previous management led to substantial asset write-downs, QGIRC has taken strong corrective measures. The ERM assessment reflects AM Best’s expectation that the new management team will continue to enhance the risk management framework and risk culture.

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