Ratings Recap: BNY Trade, Qatar General

A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Bermuda-based BNY Trade Insurance Ltd. Best said the ratings’ revisions reflect BNY Trade’s “strong capitalization, consistently positive operating results, conservative operating strategy and robust enterprise risk management (ERM) framework,” as it follows its parent’s, The Bank of New York Mellon Corporation’s ERM practices.” However, Best also noted that “BNY Trade’s limited market scope, product mix and substantial concentration in the investment of its assets,” are offsetting factors. “An additional offsetting rating factor is BNY Trade’s large (gross) underwriting exposures as it offers very high gross insurance limits and insures excess bankers’ professional liabilities with substantial insured values.” Best singled out BNY Trade’s “excellent business position, as it has close ties to and is a wholly owned subsidiary of BNY Mellon, a leading global financial services company. BNY Trade provides comprehensive reinsurance/insurance coverages/products. The company’s reinsurance is placed with the world’s significant providers, and it benefits from BNY Mellon’s significant financial resources, extensive risk mitigation and the safety programs implemented throughout the organization. As BNY Trade cedes fully assumed risk under primary bankers’ professional coverages and an all risk property policy, the company’s exposure to net underwriting losses is minimal. BNY Trade’s projected operating results indicate favorable returns, and its surplus base of over $90 million is more than adequate to support the company’s asset and credit risk exposure. While the excess bankers’ professional program and the property coverages written offer significant insured values considering the high coverage limits offered, the net impact could be burdensome.
Nevertheless, A.M. Best recognizes the low probability of such events.

A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating of B++ (Good) and the issuer credit rating of “bbb+” of Qatar General Insurance and Reinsurance Company (S.A.Q.) (QGIR). Best said the “positive outlook reflects QGIR’s continued resilient operating performance, improving business profile and strong capital position during challenging economic conditions. Additionally, QGIR has made progress developing its risk management framework. An offsetting factor is QGIR’s concentration of investments in equities and real estate assets.” In Best’s opinion, QGIR’s prospective capital position is expected to remain strong, supported by solid retained earnings and benefitting from significant market values of real estate relative book values. Best also noted that QGIR’s risk-adjusted capitalization “can absorb fluctuations in equity and real estate values, for which QGIR has a concentration of investments in these assets. Additionally, QGIR has made progress in developing its enterprise risk management framework, which requires further embedding over the next two years.” Best said it “expects QGIR to maintain its strong position in the Qatari market, where it has approximately 28 percent market share, despite increased competition following the opening up of the local market to broker and foreign insurance companies.” In Best view QGIR’s business profile continues to improve mainly through expansion of personal lines, further supported by the takaful subsidiary providing additional diversification. The Company is also expected to maintain a very good financial performance in 2009, with pre tax profits anticipated to be approximately QAR 120 million (USD 33 million) and combined ratio to remain below 85 percent over the next two years. Furthermore, Best said it “expects QGIR to improve its investment strategy to deliver more consistent returns on investments.”