Thursday 28, September 2017 by Georgina Enzer

A.M. Best assigns credit ratings to Dubai National Insurance & Reinsurance

A.M. Best has assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb+” to Dubai National Insurance & Reinsurance P.S.C. (DNIR) (United Arab Emirates).

The outlook assigned to these Credit Ratings (ratings) is stable. The ratings reflect DNIR’s solid risk-adjusted capitalisation and strong operating performance.

These factors are offset by the company’s modest business profile and developing enterprise risk management (ERM). DNIR maintains strong risk-adjusted capitalisation that benefits from low underwriting leverage and a reinsurance programme of good credit quality. Capital consumption is driven largely by investment risk stemming from the company’s concentrated exposure to volatile equity and real estate investments.

A.M. Best expects prospective risk-adjusted capitalisation to remain strong, supported by good internal capital generation and controlled underwriting growth. DNIR also benefits from an unleveraged balance sheet and excellent liquidity. DNIR has demonstrated a track record of excellent profitability, reporting a net profit of AED 44.0 million ($12.0 million) in 2016, compared with AED 40.8 million ($11.1 million) in 2015. DNIR’s underwriting operations generated an excellent five-year average combined ratio of 85 per cent (2012-2016). DNIR has maintained consistent underwriting performance despite prevailing competitive market conditions in the UAE, with significant pressure on premium rates across most lines of business.

A.M. Best expects DNIR’s prudent approach to risk selection and focus on profitability over top-line growth to support strong future technical performance. Interim results for 2017 indicate an improvement in the company’s technical profitability. DNIR’s gross written premiums reached AED 260.1 million (USD 70.8 million) in 2016, ranking the company as a mid-tier insurer within the UAE insurance market. DNIR’s franchise benefits from access to business through its shareholders and affiliated companies.

Nonetheless, on a net basis the company’s profile remains small, reflective of the low level of retention on commercial lines of business. The company has taken positive steps to strengthen its ERM framework in recent years. DNIR has improved its identification and quantification of key risks and imposed greater controls to mitigate and reduce the potential impact on earnings and risk adjusted capitalisation.

However, further steps are required for the ERM framework to be fully embedded throughout the organisation. This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

Features & Analyses

SME Finance Risk Management

  Business risks exist everywhere but early implementation of a proper management system can mitigate them once they occur, or… read more