Standard & Poor's (S&P) Ratings Services has assigned its 'BBB' long-term counterparty credit and insurer financial strength ratings to insurer Al Khaleej Takaful Group (KTG). The outlook is stable.

The ratings reflect assessments of KTG's business risk profile as fair and financial risk profile as upper adequate. S&P’s assessments of KTG's management and governance, enterprise risk management, and liquidity are neutral to the rating.

The BRP assessment reflects KTG's adequate competitive position as the fourth largest national insurance company in Qatar, where we assess industry and country risk as intermediate. KTG is a small insurer, with gross premiums written in 2014 of QAR315 million (USD86.5 million), which constrains S&P’s view of the company's BRP. Further weighing on the assessment is KTG's relatively poor historical underwriting performance compared with peers. In a very competitive market where, generally, Takaful players are yet to find their feet, KTG's combined (loss and expense) ratio has been witnessing material volatility, notably under the constraint of a high expense ratio. The agency’s base-case assumption is that KTG will gradually improve its underwriting earnings over the next two years, in line with a combined ratio of below 110 percent and a surplus in the policyholder fund. S&P’s also expects premium income to grow at least at the market rate of 10 percent per year.

KTG's extremely strong capital adequacy provides a cushion against both underwriting event stress and the potential volatility from its investment portfolio.