In A.M. Best's opinion, ARIG maintains a strong business profile in the Middle East, where it is recognized as a prominent regional reinsurer. In addition, over the last few years, the company has been diversifying its portfolio with a growing amount of international business.
ARIG's ratings continue to be confined by its weak profitability, which has traditionally relied on investment income in the absence of technical profits. Whilst A.M. Best acknowledges management's efforts to improve its technical performance, the company's 2011 technical results, to date, are poor having been affected by the large catastrophe events, in particular the Thai floods, which management estimates will generate ARIG a loss of between $6m to $10m on a net basis. Underwriting losses, combined with lower investment income will drive a significant loss for ARIG in 2011, which by A.M. Best's estimates may reduce the company's capital by as much as $15m.
Despite the reduction in capital, in A.M. Best's opinion, ARIG's prospective risk-adjusted capitalisation remains strong with sufficient room to absorb growth of 5% to 10% over the next two years, in line with management's expectations.
Additionally, A.M. Best believes ARIG has continued to enhance its enterprise risk management framework, which is on par with the company's regional reinsurance peers. The company has internal catastrophe and capital modelling capability that is supported by independent actuarial consultants.
Positive pressure on the ratings and a corresponding outlook of ARIG is likely to arise should the company demonstrate a good track record of technical profitability. Equally, negative rating pressure may result from continued technical losses or further deterioration in risk-adjusted capital.
The principal methodology used in determining these ratings is Best's Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilised include: "Understanding Universal BCAR"; "Understanding BCAR for Property/Casualty Insurers"; "Natural Catastrophe Stress Test Methodology"; "Assessing Country Risk"; and "Risk Management and the Rating Process for Insurance Companies".
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.
Source: http://www.ameinfo.com/285115.html
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