However, the ratings also take into account the developing nature of the company's enterprise risk management framework and its reliance on reinsurers.
The ratings also benefit from an enhancement due to BKIC's position and importance within the Gulf Insurance Company K.S.C. (GIC) group.
In A.M. Best's opinion, BKIC's business profile is good operating in both Bahrain and Kuwait. Whilst BKIC holds a leading position in Bahrain and is a prominent insurer in Kuwait, its profile has remained stagnant in recent years as the company aims to increase its presence in these relatively small markets.
Furthermore, BKIC has a diversified portfolio on a gross premium basis mainly geared towards property and engineering risks; however, the company's net retention levels remain low at 31.8%.
A.M. Best believes BKIC's prospective risk-adjusted capitalisation is strong with sufficient room to absorb management's anticipated business growth. In fact, BKIC's risk-adjusted capital position is set to strengthen going forward as internal capital generation outpaces growth.
BKIC has an excellent track record of profitability driven by its sound underwriting performance across all lines of business. In 2010, the company recorded net income of BD4.1m ($11m) and a combined ratio of circa 65%, benefitting from inward commissions given its low retention levels. Furthermore, net income is supported by consistent investment returns between 2% and 3% due to BKIC's conservative investment strategy, which is geared towards fixed income securities and deposits.
In A.M. Best's opinion, BKIC's enterprise risk management will remain in a developing stage, as the company remains highly reliant on its panel of reinsurers for expertise. Though work is underway at the group level, the company is currently lacking any capital modeling capabilities; however, this is mitigated by the strength of BKIC's capital position.
In recent years, GIC has been steadily increasing its shareholding in BKIC and currently owns a 56% majority stake. Also, GIC has provided BKIC with strong support, including the development of a group reinsurance programme and formulation of group-wide enterprise risk management.
The principal methodology used in determining these ratings is Best's Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilised include: "Understanding Universal BCAR"; "Understanding BCAR for Property/Casualty Insurers"; "Natural Catastrophe Stress Test Methodology"; "Assessing Country Risk"; and "Risk Management and the Rating Process for Insurance Companies".
Source: http://www.ameinfo.com/282227.html
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