"Likely to maintain strong risk-adjusted capitalisation"
AM Best has assigned a financial strength rating of A- (Excellent) and issuer credit rating of “a-” to Gulf Reinsurance Limited (Gulf Re), a newly capitalised Dubai-based reinsurer. The outlook assigned to both ratings is stable.
In AM Best’s opinion, Gulf Re is likely to maintain strong risk-adjusted capitalisation during the company’s initial years of operation, based on conservative performance forecasts and AM Best’s specific insurance start-up criteria. Gulf Re’s initial capital of $200m has been provided 50% each by Gulf Investment Company (GIC) and Arch Capital Group Ltd (ACGL). AM Best believes the company will fully capitalise all operating profits up to at least 2013, which will be sufficient to maintain strong risk-adjusted capitalisation as the company expands its business during these years. Additionally, a further $200m of capital is available at the holding company and can be transferred to Gulf Re if required, enhancing the company’s capital flexibility.
AM Best believes that modest underwriting performance in the first two years will be supported by steady investment income during the period.
Loss ratios for the classes of business to be written in the six Gulf Cooperation Council (GCC) countries historically have been low, and AM
Best anticipates that this will continue into the near future. This factor, combined with the substantial experience of the senior underwriters and management of Gulf Re, the technical support of ACGL through the provision of actuarial and other expertise, low start-up costs and the advantageous tax regime, is likely to result in good financial performance for the company.
AM Best anticipates that Gulf Re’s business profile will be enhanced in the region by the company’s affiliation to GIC, a Kuwait-based financial institution jointly owned by the six member states of the GCC: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
GIC’s focus is on promoting private enterprise and developing the capital markets of the GCC. The company also has diversified interests in a number of industries.