A.M. Best Revises Outlooks to Negative for Nomad Insurance Company JSC
A.M. Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of B- (Fair) and the Long-Term Issuer Credit Rating of “bb-”for Nomad Insurance Company JSC (Nomad), the wholly owned subsidiary of Nomad Insurance Group Limited, a private non-operating company (both entities are domiciled in Kazakhstan).
The outlook revisions to negative reflect Nomad’s lower-than-expected risk-adjusted capitalisation at year-end 2016, which was due to an increase in the company’s net retained underwriting risk following the non-renewal of its quota share reinsurance protection for motor third-party liability. The company’s retention ratio increased to 81% in 2016 from 41% in the previous year, and A.M. Best expects it to stay at this level in 2017. Nomad’s risk-adjusted capitalisation is expected to improve in 2017 and 2018, supported by positive retained earnings. However, should this improvement not materialise, a further negative rating action is likely.
In addition, the Credit Ratings (ratings) reflect Nomad’s established business profile in its domestic market and its track record of positive, but volatile, operating performance. The ratings also take into account the company’s exposure to Kazakhstan’s high country risk.
Nomad achieved a strong result in 2016, demonstrated by a reported combined ratio of 83.8%. The company benefits from a track record of profitable underwriting performance, although a one-off negative underwriting result was reported in 2015 (combined ratio: 184%). An overall profit was reported in 2015 due to significant foreign exchange gains.
Nomad’s investment performance continues to benefit from strong investment yields derived from its portfolio of cash, short-term deposits and fixed income securities. However, prospective investment returns are subject to volatility due to the low credit quality of the company’s invested assets and the high level of financial system risk in Kazakhstan.
Nomad maintains an established business profile, ranking as the fifth-largest insurer in Kazakhstan’s non-life market. Nonetheless, A.M. Best believes that a high level of competition from a large number of insurers operating in a relatively small insurance market and the impact of Kazakhstan’s fluctuating regulatory environment reduce Nomad’s ability to defend its competitive position.
This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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