Rating action              

MARC Ratings has affirmed its insurer financial strength rating of AA+ with a stable outlook on Bermuda-based International General Insurance Co Ltd (IGI). The rating is based on Malaysia’s national scale. 

Rationale        

The rating affirmation reflects IGI’s healthy capitalisation level, prudent reserving approach, and resilient performance underpinned by a well-diversified underwriting portfolio across business lines and geographies. Moderating factors to the rating are IGI’s moderate size (with a total asset size of about US$1.6 billion as at end-2022) and exposure to regulatory risks in the different jurisdictions it operates in.  

IGI is a specialty insurer and had gross written premiums (GWP) of US$581.8 million as at end-2022.The 6.6% y-o-y GWP growth in 2022, particularly in the energy, property, and treaty reinsurance lines, reflects a shift in strategy towards short-tail lines. Its short-tail portfolio grew to 54.8% as at end-2022 (average for 2019-2022: 53.8%) and generates higher renewal premium rates. In contrast, casualty (a key long-tail business line) which accounted for 32.9% of GWP, recorded marginal growth 0.7% y-o-y (2021: 20.6% y-o-y). Net profit rose by 87.7% y-o-y to US$78.5 million, mainly supported by lower claims and higher net earned premiums during the period. Net combined ratio improved to 79.5% (2021: 86.8%), compared to that of its peers of around 90%. 

Notwithstanding IGI’s recent strong performance, it remains exposed to catastrophic events. Exposure to catastrophe risk is mitigated by its reinsurance strategy and management expertise in insurance, reinsurance and capital markets. In relation to Hurricane Ian that hit US and Cuba in late September 2022, the insurer had incurred a minimal loss of US$2 million which was adequately covered by its high capital surplus. IGI has indicated that the impact from the earthquake in Turkiye and Syria in February 2023 was not material given the insurer’s exposure to the two countries is low. The insurer does not provide war coverage in relation to the Russia-Ukraine War. For 2022, IGI’s net incurred loss ratio stood at 41.9% (2021: 51.0%).

IGI has a strong capital base as reflected by a regulatory solvency ratio of 179% as at end-2022, well above the minimum of 120% set by the Bermuda Monetary Authority (BMA). It had statutory capital and surplus of US$414 million as at end-2022 (2021: US$378 million). Its high cash and short-term deposits of US$435.0 million or 43.9% of the insurer’s investment portfolio (2021: US$491.1 million, 46.2%) is strong. Liquid assets-to-net technical reserves ratio stood at 135.3% as at end-2022 (2021: 137.7%).

The credit quality of its fixed-income portfolio remained satisfactory during the year with investment-grade securities — based on the international rating scale — accounting for 99.0% of the portfolio (2021: 97.6%) while securities rated A- or above constituted 69.1%; of this, high-quality securities rated AA- and above accounted for 10.9% (2021: 5.7%). 

Any upgrade would be guided by sustained portfolio growth that improves its asset size, financial metrics and investment returns.

The rating and/or outlook could be revised downwards in the event of unexpected large financial losses arising from claims not adequately covered by reinsurance and/or significant changes in business profile.