AM Best Affirms Credit Ratings of Dubai Insurance Company (PSC)

AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Dubai Insurance Company (PSC) (DIC) (United Arab Emirates). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect DIC’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.

DIC’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by strong organic capital generation. The assessment also factors in the company’s sufficient liquidity and prudent reserving, which incorporates buffers over the actuarial best estimate. An offsetting factor in the balance sheet strength assessment is the company’s high dependence on reinsurance, as evidenced by a retention ratio of 14.0% in 2020. The associated counterparty credit risk is mitigated partially by the use of a panel of international reinsurers of high credit quality. The assessment also considers the potential volatility in other comprehensive income introduced by DIC’s exposure to changes in the value of its equity investments.

The company has a track record of strong operating performance as demonstrated by an excellent five-year (2016-2020) weighted-average combined ratio and return-on-equity (ROE) of 72.9% and 10.3%, respectively (as calculated by AM Best). In 2020, DIC reported a technical profit of AED 36.2 million, equating to an ROE of 10.3%. Despite challenging economic conditions, earnings from the worker protection program (WPP) product, which are linked to the macroeconomic environment, made a substantial contribution to the company’s technical result. All other lines of business were also profitable in 2020, although the market remained very competitive, with significant pressure on premium rates. DIC’s technical result benefits from significant inward reinsurance commissions.

In recent years, DIC has enhanced its market position successfully in a highly competitive market without compromising technical profitability. The introduction of the WPP product in the second half of 2018 has significantly diversified DIC’s business mix, which historically was concentrated primarily in motor and medical lines, consistent with other domestic insurers. AM Best expects the company’s market position to continue to benefit from the ongoing roll-out of the WPP, as well as the active development of new products using a DIC-led consortium..

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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