Fitch places JBC NOMAD Insurance Company’s ratings on RWN

Dec 11. Reuters

Fitch places JBC NOMAD Insurance Company's ratings on RWNFitch Ratings has placed JBC Insurance Company NOMAD Insurance (Kazakhstan)’s (NOMAD) Insurer Financial Strength (IFS) rating of ‘B’ and National IFS rating of ‘BB+(kaz)’ on Rating Watch Negative (RWN).

The rating action is driven by the decision by the ‘Committee for the control and supervision of financial market and financial organisations of the National Bank of Kazakhstan’ (Committee) to suspend NOMAD’s compulsory motor third-party liability (MTPL) insurance licence. The reason for the suspension cited by the Committee is NOMAD’s non-timely payment of MTPL claims, improper accounting for financial transactions and non-compliance with insurance agent regulation. Fitch understands that the licence is suspended for three months from 26 November 2012.

Fitch’s immediate concern is about potential damage to NOMAD’s business and franchise from the Committee’s decision. MTPL constitutes a major part of the company’s business (around 40% of gross written premium). If the licence is suspended for a prolonged period, NOMAD’s liquidity position could also suffer.

The Committee has also suspended NOMAD’s sister company NOMAD Life’s (not rated) compulsory occupational accident insurance licence. In Fitch’s view, this could be detrimental to the overall NOMAD franchise in the fast-growing Kazakh insurance market.

Fitch expects to resolve the RWN following discussions with NOMAD’s management and any further announcements from the Committee. If the suspension is removed within a short period and with no material damage to NOMAD’s business position, the ratings are likely to be affirmed. The ratings will be downgraded if Fitch believes the risk of an interruption to NOMAD’s payments has increased, which could be the case if, for example, the licence remains suspended for the full three months or longer.

http://www.reuters.com/article/2012/12/11/idUSWLB212420121211

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