AM Best to reveal insurance market insights during Cayman Islands event
- AM Best confirmed B++ Financial Strength Rating and bbb+ Long-Term Issuer Credit Rating for Al Dhafra Insurance Company P.S.C.
- The company's balance sheet is assessed as very strong, though it faces challenges like high reinsurance dependence.
- Given the ratings and recent improvements in technical performance, the company's future outlook appears stable.
In December 2024, AM Best affirmed the Financial Strength Rating of B++ and the Long-Term Issuer Credit Rating of bbb+ for Al Dhafra Insurance Company P.S.C. (ADIC), based in the United Arab Emirates. These ratings are indicative of the company's stable outlook and reflect its exceptionally strong balance sheet strength, indicated by its robust risk-adjusted capitalization as per Best's Capital Adequacy Ratio. ADIC's score also highlights its effective enterprise risk management and historical capacity for internal capital generation. However, AM Best noted certain limitations including a concentrated investment profile and high dependency on reinsurance, as fewer than 30% of its insurance revenue was retained over the past couple of years. ADIC has a commendable history of operational performance, recording an average return on equity of 10.9% from 2019 to 2023, although the firm's technical profitability saw a significant decline starting in 2021 due to heightened competition and pricing pressures prevalent in the UAE insurance market. The company's management undertook corrective measures, leading to improved technical performance as evidenced by a combined ratio of 86% reported for the first three quarters of 2024. Despite the limitations, ADIC is positioned as a mid-tier insurer in the UAE market, showing strong liquidity and a diversified underwriting portfolio across several business lines. Still, the company’s revenue generation remains limited to motor and medical insurance lines. The overall assessment by AM Best indicates a solid foundation for ADIC moving forward. Simultaneously, AM Best announced plans to host an Insurance Market Briefing in February 2025 in the Cayman Islands, aiming to provide insights into the U.S. insurance industry and global reinsurance trends. This event will feature discussions regarding significant issues impacting the (re)insurance sector, including asset allocations and evolving regulations. Senior analytical staff will be present to share rating and investment trends, which could have implications for numerous carriers in the industry. The day’s agenda includes an overview of the proposed updates to AM Best's criteria for assessing alternative risk transfer entities, drawing attention to emerging challenges and strategies related to risk management in insurance.