Qatar Islamic Insurance Group (QIIG) employs a hybrid takaful model, where the shareholders’ fund charges the policyholders’ fund a wakala fee based on gross written contributions (GWC) and a mudaraba fee based on investment income, noted AM Best.
QIIG’s ability to accumulate surpluses within the policyholders’ fund whilst regularly distributing surplus back to policyholders, supports the sustainability of its takaful model, said the ratings agency.
The takaful operator reported a net profit of QAR80.1m ($22.2m) for 2021, equivalent to a return on equity of 12.9%, demonstrating its ability to generate strong operating returns. Profitability was driven mainly by QIIG’s strong and stable technical results, demonstrated by a five-year (2017-2021) weighted average combined ratio of 66.7%. QIIG’s investment yields have been modest in recent years, driven by fair value losses arising on real estate and the impairment of investments in associates.
QIIG’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which was at the strongest level at year-end 2021, as measured by Best’s capital adequacy ratio, and is expected to remain at the strongest level over the medium term. Supporting the balance sheet strength assessment is QIIG’s consistent demonstration of internal capital generation. Capital and surplus grew by 7.3% in 2021 to QAR424.8m (10.3% growth when including the policyholders’ fund to QAR652.3m).
While QIIG maintains sufficient liquidity to support its insurance operations, it has material holdings of illiquid assets in the form of real estate and investments in associates, which accounted for approximately 45% of its total investments in 2021. QIIG is moderately dependent on reinsurance, as the group cedes a high proportion of its large commercial risks. M