AM Best has downgraded the financial strength rating to A- (Excellent) from A (Excellent) and the long-term issuer credit ratings to “a-” (Excellent) from “a” (Excellent) of Qatar Insurance Company QSPC and its Bermudian-based subsidiary, Antares Reinsurance Company Limited.

The outlook of these credit ratings has been revised to stable from negative.

The ratings reflect QIC’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The downgrades reflect a revision in AM Best’s assessment of QIC’s operating performance to adequate from strong. Underwriting results have been unprofitable and volatile in recent years, evidenced by a five-year (2017-2021) weighted average combined ratio of 105 per cent with a standard deviation of 5 per cent.

While QIC has generally been profitable over the period, AM Best considers that the group’s overall results are no longer supportive of a strong operating performance assessment.

The group’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s capital adequacy ratio, and is supported by good financial flexibility, a conservative investment portfolio by asset class and low reinsurance dependence.

An offsetting factor is the concentration of QIC’s assets towards Qatar and Gulf Co-operation Council countries, despite the vast majority of the group’s business being sourced from the United Kingdom, Europe and Bermuda.

Furthermore, QIC is developing, but currently lacks a consistent group-wide approach to reserving. Reserves are held at the best estimate, with limited buffers to absorb volatility.

In 2021, QIC reported gross written premium of QAR 12.6 billion ($3.5 billion), an increase of 4 per cent over 2020.

Approximately 80 per cent of GWP is derived from Antares Global (previously Qatar Global, rebranded in early 2022), QIC’s international division, which benefits from a geographically diversified multiplatform approach, including a Lloyd’s platform, a Bermuda reinsurer and carriers in Europe.

QIC has a leading position in Qatar and a robust foothold in the United Arab Emirates market, though these markets comprise a relatively small proportion of overall group revenue.

QIC’s business mix has been volatile in recent years, AM Best said, with a growing focus on motor insurance which exceeded 50 per cent of consolidated GWP in 2021.

However, the group's recent announcement stating its intention to divest from its Gibraltar-based carriers — which largely underwrite UK motor business — will likely halt this trend and result in a decline of motor premium over the medium-to-long term.