A.M. Best Assigns Ratings to National Takaful Company (Watania) PJSC
LONDON -- March 18, 2013
A.M. Best Europe – Rating Services Limited has assigned a financial strength
rating of B+ (Good) and an issuer credit rating of “bbb-” to National Takaful
Company (Watania) PJSC (Watania) (United Arab Emirates). The outlook assigned
to both ratings is stable.
The ratings for Watania reflect its strong prospective risk-adjusted
capitalisation, supported by strong reinsurance protection, a conservative
investment strategy and its sound business plan. Offsetting rating factors are
below target results in 2012 and the execution risk Watania faces in the
competitive UAE insurance market.
Watania was founded in 2011 as a new company providing all lines of non-life
Takaful business. The company currently has offices in Abu Dhabi and Dubai,
with plans to expand into the other Emirates during 2013. Medical is the most
significant business line, contributing 72% of gross written premiums (GWP)
and 81% of net premiums in 2012.
Watania benefits from strong risk-adjusted capitalisation with sufficient
capital to support current and prospective underwriting levels. Risk-adjusted
capitalisation benefits from a low level of retained insurance risk supported
by a well rated reinsurance programme and a conservative fixed income focused
investment portfolio. Watania’s performance in 2012 was below its plan in
terms of GWP and profitability. Watania’s overall portfolio in 2012 was more
biased towards medical business than expected. Due to lower volume overall the
company was less able to cover its high initial expenses. The loss for 2012
was AED 10.5 million (USD 2.9 million).
Watania’s enterprise risk management is viewed as developing with a strong
structure being implemented over the course of 2013. The company has a
financial analysis tool, which will be used to monitor capital adequacy and
shape business plans as well as reinsurance optimisation and pricing strategy.
Watania has entered a very competitive market place and will face pricing
pressure from both takaful and general insurance providers, which may present
difficulty in achieving ambitious premium volume targets. However, the company
benefits from strong management and a good understanding of insurance risk
control. In the future, positive or negative rating pressures are likely to
result from Watania’s ability to successfully execute its business plan.
The methodology used in determining these ratings is Best’s Credit Rating
Methodology, which provides a comprehensive explanation of A.M. Best’s rating
process and contains the different rating criteria employed in the rating
process. Key criteria utilised include: “Evaluating Country Risk”;
“Understanding Universal BCAR”; “Understanding BCAR for Property/Casualty
Insurers”; “Rating New Company Formations”; “Rating Takaful (Shari’a
Compliant) Insurance Companies”; “Rating Members of Insurance Groups”; and
“Risk Management and the Rating Process for Insurance Companies”. Best’s
Credit Rating Methodology can be at www.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the following is a link to
required disclosures: A.M. Best Europe - Rating Services Limited Supplementary
A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best
Company. Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more information,
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
A.M. Best Company, Inc.
Michael Dunckley, +(44) 20 7397 0321
Associate Financial Analyst
Mahesh Mistry, +(44) 20 7397 0325
Rachelle Morrow, +1-908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, +1-908-439-2200, ext. 5644
Assistant Vice President, Public Relations
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