special report: jordan insurance ratings: benchmarking

Jordan Life and Non-Life Insurance

Ratings of Jordan insurers on the slide as capital adequacy under pressure and competition bites

Ratings ReviewMay 29, 2019

Analytical Contacts:Luca Patron, London Tel: +44 20 7397 [email protected]

Mahesh Mistry, LondonTel: +44 20 7397 [email protected]

Editorial Managers:Yvette Essen, LondonTel: +44 20 7397 0322 [email protected]

Richard Hayes, LondonTel: +44 20 7397 [email protected]

2019-071

BEST’S SPECIAL REPORTOur Insight, Your Advantage.

Copyright © 2019 A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED. No portion of this content may be reproduced, distributed, or stored in a database or retrieval system, or transmitted in any form or by any means without the prior written permission of AM Best. While the content was obtained from sources believed to be reliable, its accuracy is not guaranteed. For additional details, refer to our Terms of Use available at the AM Best website: www.ambest.com/terms.

Jordan Insurance Ratings: BenchmarkingThe Jordan insurance market remains highly competitive, with pressure on technical performance accompanied by economic challenges. At present, there are 24 insurers chasing premiums of approximately JOD 600 million (USD 845 million). Despite the market showing reasonable growth rates in recent years it is also facing a number of challenges. Pricing pressure on the core business segments and tariffed motor third-party liability business have hindered operating performance. Additionally, rising fiscal deficits have led to cuts in government spending and tax hikes, and the background of social unrest and weakness in commodity prices is a concern. Furthermore, the widespread lack of awareness and understanding of insurance and risk mitigation amongst the population is reflective of the low penetration rate.

Despite the fragmented nature of the Jordanian insurance sector, approximately half of premiums are controlled by five companies, with 19 companies competing for the rest. Only two insurers (Arab Orient Insurance Company and Jordan Insurance Company) had a market share (based on gross written premium - GWP) exceeding 10% as at year-end 2017. The life insurance market is a lot less developed and is even more concentrated than the non-life sector, with the largest three insurers accounting for over 70% of life GWP.

Jordan Ratings Distribution; Credit Quality Generally Declining The distribution of issuer credit ratings (ICRs) of Jordan insurers at year-end 2017 varied from “bbb+” to “bbb-” (see Exhibit 1). Over the past three years, AM Best has observed a decline in the financial strength of Jordanian insurers, with notable downgrades and revision in outlooks to Negative for many rated insurers. The current distribution of ICRs is from “bbb” to “bb+”. The primary reasons for the Negative rating actions stem from weakened capital positions owing to a deterioration in operating performance from strong market competition; servicing generous dividend policies; higher underwriting leverage, and risk management deficiencies. AM Best expects this trend to continue over the short term as margins remain squeezed and onerous dividend requirements remain. However, there are exceptions with some AM Best-rated companies successfully navigating the challenging operating environment. In 2019, Jordan French Insurance Company maintained its ICR of “bb+” with a Positive outlook, while First Insurance has an ICR of “bbb” with a Positive outlook (benefitting from its position as being part of a financially stronger insurance group).

Balance Sheet StrengthBalance sheet strength is seen as the foundation for financial security, and its evaluation is critical in determining an insurer’s ability to meet its current and ongoing obligations. AM Best’s balance sheet strength assessments for rated companies in Jordan are distributed across the Very Strong and Strong categories (see Exhibit 3).

The balance sheet strength assessment descriptors range from Strongest to Very Weak and is determined by analysing an array of quantitative and qualitative factors. Before completing an initial rating assessment, the country risk tier (CRT) associated with an insurer’s country of domicile, as well as the countries of its operations, must be incorporated before a baseline

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Ratings Review Jordan Life and Non-Life Insurance

rating assessment is selected (see Exhibit 4). AM Best currently classifies Jordan as CRT-4 and the applicable baseline assessment ranges are highlighted. If the company’s balance sheet strength assessment is strong, then the applicable baseline assessment range on the ICR scale is “bbb/bbb-/bb+”.

The factors considered for the balance sheet assessment include, but are not limited to, risk-adjusted capitalisation, capital management, financial flexibility, reinsurance dependence, quality and appropriateness of the reinsurance programme, reserve adequacy, size of the company and asset quality.

Risk-Adjusted Capitalisation Varies Materially Among InsurersAM Best uses a proprietary capital adequacy model – Best’s Capital Adequacy Ratio (BCAR) – to measure risk-adjusted capitalisation across several confidence levels. Risk-adjusted capitalisation is assessed as Strongest when the standard BCAR score is above 25 at the 99.6% value at risk (VaR) confidence level, and Very Strong when the BCAR score is between 10% and 25% (see Exhibit 5).

As of Apr. 1, 2019, all but one AM Best-rated Jordanian insurance company has a BCAR score of at least very strong, with three of them comfortably within the strongest level. In general, the level of risk-adjusted capitalisation for the market is materially lower than the overall Middle East-rated population (approximately 45%).

For Jordanian insurers, the largest component of required capital is usually investment risk followed by underwriting risk (calculated as the sum of reserve risk and premium risk), and then credit risk (see Exhibit 7). AM Best notes a vast deviation between insurers; some have exceptionally high

Exhibit 1Jordan Insurers – Best's Issuer Credit Ratings (2012 - Apr. 2019)

ICR

Outlook

ICR

Outlook

ICR

Outlook

ICR

Outlook

ICR

Outlook

ICR

Outlook

ICR

OutlookNotes:UR/Neg: Under Review with Negative ImplicationsUR/Pos: Under Review with Positive ImplicationsNR: Not Rated

2017 2018

Arab Orientbbb+ bbb

Stable UR/Neg Negative

2012 2013 2014 2015 2016

Jordan Insurance

bbb+ bbb- bb+

Stable Negative

Arabia - Jordan NR

bbb-

Stable Negative

First Insurance

bbb+

Stable UR/Pos Positive

Source: AM Best data and research

Jordan French NR

bb+

Positive

Middle East Insurance

bbb bbb-

Stable Negative Stable

Jordan Inter-national NR

bbb-

Stable Neg

3


exposure to volatile equity and real estate investments (up to 90% of invested assets), in part as a hedge against inflation, while others maintain conservative asset allocations with a high proportion of cash investments. The insurers that tend to have more conservative investment policies and hence lower associated asset charges in AM Best’s capital model have more robust solvency ratios. The lower quality of assets held by insurers, coupled with the thinner capital buffers, highlights their sensitivity to changing asset values, excessive growth and insufficient levels of profitability.

Country specific risk charges – based on the origin of the asset – are incorporated within the BCAR model to capture the potential for market illiquidity and volatility to increase the risk stemming from an insurer’s invested assets. Countries are categorised into one of five Country Investment Classes (CICs), with CIC I representing economies with relatively stable and liquid capital markets and CIC V representing markets with the least liquidity and highest volatility. Jordan is currently categorised as CIC IV. Domestic assets dominate the investment portfolios of most Jordanian insurers.

Capital Management Unsophisticated, Reliant on Regulatory RequirementsThe capital management of Jordanian insurers revolves primarily around local regulatory requirements. The regulatory solvency ratio is calculated through a risk-based model, where available capital is measured against capital required for risks that arise from investments, receivables, technical liabilities and premiums.

To determine credit ratings for (re)insurers, AM Best analyses the company’s balance sheet strength, operating performance, business profile and enterprise risk management (ERM). The potential for a lift or drag from the wider group is also considered. As seen in Exhibit 2, country risk is assessed over the three building blocks of balance sheet strength, operating performance and business profile.

The first step in the development of a rating recommendation is the evaluation of the balance sheet strength, whose outcome is represented on the issuer credit rating (ICR) scale, e.g. “bbb”. The evaluation of the other building blocks would then result in a positive, neutral or negative adjustment from the baseline assessment, subject to stated constraints (see Exhibit 2). The final step is the determination of rating lift or drag from the group, if applicable. For more information, visit the Best’s Credit Rating Methodology (BCRM) section of AM Best’s website.

This report discusses AM Best’s key rating considerations in the building block approach for insurance companies in Jordan. The analysis is based on the data for companies that were rated as of Apr. 1, 2019. The breakdown of the building blocks for each assessment is illustrated in Exhibit 3.

BalanceSheet

Strength

Baseline

OperatingPerformance

(+2/-3)

BusinessProfile

(+2/-2)

EnterpriseRisk

Management

(+1/-4)

ComprehensiveAdjustment

(+1/-1)

Rating Lift/Drag

IssuerCreditRating

Country Risk

Maximum +2

Exhibit 2AM Best’s Rating Process

Source: Best’s Credit Rating Methodology

4


Despite the regulator’s tolerance in some instances, there have been a number of companies forced into liquidation (such as Al Barakah Takaful and Arab German Insurance in 2014, whose licences were revoked due to their prolonged inability to meet regulatory solvency requirements).

In 2017, a further six companies were reported to have failed to meet regulatory solvency requirements (see Exhibit 8), and as a consequence of shortfalls in their solvency ratios, a similar number could leave the domestic insurance market (as reported in February 2019 by the Chairman of the Jordan Insurance Federation). In recent years, there has been a notable decline in the solvency margin for many insurers, with a handful of companies hovering marginally above the solvency requirement as at year-end 2018.

1

6

0

Strong (+1) Adequate (0) Marginal (-1)

Exhibit 3bRated Jordan Insurers – Operating Performance AssessmentsBy Number of Companies

As of 1 March, 2019Source: AM Best data and research

0

2

5

Strongest Very Strong Strong

Exhibit 3aRated Jordan Insurers – Balance Sheet Strength AssessmentsBy Number of Companies


0

2

5

Favorable (+1) Neutral (0) Limited (-1)

Exhibit 3cRated Jordan Insurers – Business Profile AssessmentsBy Number of Companies


4

3

0

Appropriate (0) Marginal (-1) Weak (-2)

Exhibit 3dRated Jordan Insurers – Enterprise Risk Management AssessmentsBy Number of Companies


5


CRT-1 CRT-2 CRT-3 CRT-4 CRT-5

Strongest a+/a a+/a a/a- a-/bbb+ bbb+/bbb

Very Strong a/a- a/a- a-/bbb+ bbb+/bbb bbb/bbb-

Strong a-/bbb+ a-/bbb+ bbb+/bbb/bbb- bbb/bbb-/bb+ bbb-/bb+/bb

Adequate bbb+/bbb/bbb- bbb+/bbb/bbb- bbb-/bb+/bb bb+/bb/bb- bb/bb-/b+

Weak bb+/bb/bb- bb+/bb/bb- bb-/b+/b b+/b/b- b/b-/ccc+

Very Weak b+ and below b+ and below b- and below ccc+ and below ccc and below

Source: Best's Credit Rating Methodology

Com

bine

d B

alan

ce S

heet

Ass

essm

ent

(Rat

ing

Uni

t/ H

oldi

ng C

ompa

ny)

Exhibit 4AM Best's Ratings Process – Country Risk Tiers

Country Risk Tier

Exhibit 5AM Best's Ratings Process – BCAR Assessments

VaR Confidence Level (%) BCAR BCAR Assessment

99.6 > 25 at 99.6 Strongest

99.6 > 10 at 99.6 & ≤ 25 at 99.6 Very Strong

99.5 > 0 at 99.5 & ≤ 10 at 99.6 Strong

99 > 0 at 99 & ≤ 0 at 99.5 Adequate

95 > 0 at 95 & ≤ 0 at 99 Weak

95 ≤ 0 at 95 Very Weak

Source: Best's Credit Rating Methodology

0

10

20

30

40

50

60

70

First InsuranceCo (CS)

Arab OrientInsuranceCompany

JordanInternationalInsuranceCompany

Jordan FrenchInsurance

Company Ltd

Middle EastInsurance

Company Plc

Jordan InsuranceCompany Plc

ARABIA Insurance

Company –Jordan

(%)

Best's Capital Adequacy Ratio (VaR 99.6%) Strongest Threshold (25%)Very Strong Threshold (10%) Jordan Average

Exhibit 6Rated Jordan Insurers – Balance Sheet Strength – BCAR Scores at 99.6% Confidence Level, Apr. 1, 2019


6


As shown in Exhibit 9, the total shareholders’ equity in the Jordanian market has not grown over the past 10 years, with market equity standing between JOD 300-350 million. This is driven partly by the unsatisfactory overall performance of the market, with return on equity (ROE) of around 5%. AM Best notes that ROE has never reached double digits. Furthermore, any profit generated is most likely to have been distributed as dividends which are largely

0

50

100

150

200

250

300

350

Exhibit 8Regulatory Solvency Margin in the Jordan Market (Dec. 31, 2017)(%)


Regulatory Threshold: 150

4 47 12 12 21 3

0 20 40 60 80 100(%)

Fixed Income Risk Interest Rate Risk Equity Risk Credit RiskReserve Risk Premium Risk Business Risk Catastrophe Risk

Exhibit 7Rated Jordan Insurers – Required Capital Components by Risk Category, Year-End 2017


7


paid as a proportion of paid-up capital and with very few insurers linking dividend payment to profit generation. While market capitalisation remains unchanged over the past decade, the resultant growth driving increased underwriting risk has reduced risk-adjusted capitalisation and local solvency ratios for many market participants. The direction of decline is a major concern for the market and AM Best believes that it needs rectifying to ensure the future sustainability of insurers’ business models. In 2018, despite the improved performance, shareholders’ equity showed another decline of approximately 4%.

Additionally, there could be a further hit to solvency levels from insufficient reserves held for motor third-party liability where payouts for disability claims have materially increased over the past year. AM Best believes that some companies may not have appropriate levels of reserves for this change in the claims experience.

Operating PerformanceAM Best views operating performance as a leading indicator of future balance sheet strength and long-term financial stability. Operating performance is analysed on an absolute basis, taking into account profitability as well as the diversity and sustainability of earnings, and compared against appropriate benchmarks.

The operating performance of most of AM Best-rated Jordanian insurers is assessed as Adequate, with only one company assessed as Strong as of Apr. 1, 2019. Even though the challenges of the competitive Jordanian insurance market affected the ratings of some companies in the past, the overall operating performance of AM Best-rated companies remains at a good level and above the average market performance, benefitting from economies of scale and brand recognition. The low interest rate environment has also contributed to low overall ROEs.

Underwriting PerformanceIt is AM Best’s view that a robust and stable underwriting performance is considered to be an essential requisite to reach the Strong assessment. In particular, a historically good combined

0

20

40

60

80

100

120

0

100

200

300

400

500

600

700

Total Shareholders' Equity Total Underwritten Premiums (GWP) Equity/GWP

Exhibit 9Historical Gross Written Premium (GWP) and Shareholders' Equity in the Jordan Market (2008-2017)

(JO

D m

illion

s)


(%)

8


ratio is an indicator of an operating performance that will be able to generate strong returns for a long period. Most AM Best-rated insurers in Jordan have an adequate assessment with a five-year average ROE 5.9% and a combined ratio marginally below 100%. AM Best also notes that the five-year average combined ratio for the only company viewed as Strong produces much superior combined ratios at 90%.

Despite the larger market participants producing stronger results over the cycle, they have not been immune to market challenges. In 2017, the seven largest companies made a loss of JOD 5.7 million, which was heavily influenced by Arab Orient’s negative result, while in 2018, the result rebounded to a profit of JOD 9.3 million. This represents approximately 63% of the profits made by the whole market. As can be seen in Exhibit 10, the performance of AM Best-rated insurers to year-end 2017 is volatile. Some of the leading insurers have shown declining profitability in recent years, with many producing rising loss ratios and low to negative ROEs. The rationale for the weakened market performance was that many insurers suffered from market competition and pressure on pricing, and others have had their balance sheets adjusted or restated due to governance issues. In AM Best’s opinion, some of these issues have been rectified, resulting in improved performance in 2018.

In 2017, the medical healthcare segment suffered a big downturn in fortunes with the combined ratio rising from 93% in 2015 to 122% in 2017. This movement is attributable to Arab Orient, which accounts for about 40% of the GWP of the whole market. The company had discovered a material error in its accounting for medical ceded premiums in 2016 and took remedial actions that severely affected its performance. Moreover, motor third-party liability (MTPL), which is distributed to companies on a pro-rata basis linked to the financial size of the

Exhibit 10

Loss Ratio (%) 2013 2014 2015 2016 2017

Arab Orient Insurance Company 83 79 71 87 120

ARABIA Insurance Company – Jordan 78 77 83 75 76

First Insurance Co (CS) 81 76 75 73 78

Jordan French Insurance Company Ltd 84 70 68 68 70

Jordan Insurance Company Plc 76 67 70 78 80

Jordan International Insurance Company 76 83 76 81 95

Middle East Insurance Company Plc 70 70 68 70 72

Average Loss Ratio for AM Best-Rated Jordan Insurers 79 74 71 78 88

Return on Equity (%)Arab Orient Insurance Company 15 17 13 4 -39

ARABIA Insurance Company – Jordan 4 7 1 6 4

First Insurance Co (CS) 3 5 5 7 8

Jordan French Insurance Company Ltd 3 21 19 21 15

Jordan Insurance Company Plc 1 8 2 3 -1

Jordan International Insurance Company 3 5 7 4 -2

Middle East Insurance Company Plc 8 6 6 12 3

Average ROE for AM Best-Rated Jordan Insurers 5 9 7 7 -4Source: AM Best data and research

Operating Performance Ratios in the Jordan Market(2013-2017)

9


company, continues to impact technical earnings. MTPL is tariffed by the government, with companies having some, although limited, manoeuvrability on pricing. This class of business is producing a loss from the market and is generally compensated by the higher margins produced from other business classes. Despite efforts made by insurers to lobby against restricted pricing and the inflationary costs associated with MTPL, the product is expected to continue to hamper performance. Moreover, some of the market participants, such as Al Nisr and Jordan International, have decided to exit the segment in order to remove the burden of MTPL on their portfolio. In 2018, motor continued to place a drag on performance, with the loss ratio running at 106% for the year, causing the market to lose JOD 14 million, plus the associated expenses and commission for writing this class of business. Medical provided some welcome relief with stronger earnings for 2018.

Motor third-party liability is expected to remain loss-making for the market, primarily driven by higher claims costs resulting from legal firms taking a greater proportion of claims to courts, who are, in turn, ruling on higher payments for disability claims. This is a major concern for the market as such claims experience is not factored into the mandatory tariff set by the government, and therefore acts as a significant ‘indirect tax’ imposed on insurers.

The performance of other business classes, such as property, engineering and marine, continue to perform relatively well. These risks tend to have very low retention levels and are heavily ceded into the international reinsurance market. Companies benefit from lucrative inward reinsurance commissions from these contracts to bolster earnings.

The ability for companies to improve and sustain stronger earnings is critical to insurers’ long-term longevity.

Business ProfileOn a global scale, AM Best-rated Jordanian insurers are deemed to have a limited business profile. Most have very little geographical diversification and are predominantly single-market participants. Moreover, while some companies have moderate diversification on a gross basis, net premiums are geared towards motor and medical. The level of product differentiation between participants is limited, with a lack of innovation and product transformation of new ideas to change traditional market concepts. The Jordanian insurance market is also fragmented, with Arab Orient the only clear leader in the non-life and medical sectors with a market share of around 20%.

In AM Best’s analysis, five out of seven insurers receive a Limited business profile assessment (see Exhibit 11). Only Arab Orient and Jordan Insurance (the largest life company by GWP)

Exhibit 11AM Best-Rated Jordan Insurers – Business Profile Assessments

CompanyBusiness

Profile

Market Position

2017 GWPCompanies'

Share (%)2017 GWP

(JOD millions)Arab Orient Insurance Company Neutral 1 16.1 95.4ARABIA Insurance Company – Jordan Limited 11 3.6 21.3First Insurance Co (CS) Limited 4 6.7 39.6Jordan French Insurance Company Ltd Limited 6 4.5 26.7Jordan Insurance Company Plc Neutral 2 10.7 63.7Jordan International Insurance Company Limited 13 3.2 19.2Middle East Insurance Company Plc Limited 3 6.9 41.2


10


are assessed as Neutral. Jordan’s insurance market is deemed to be relatively small, with a GWP of about JOD 600 million in 2017 and 2018. In AM Best’s opinion, there are limited opportunities for insurers to grow domestically without undercutting competitors.

Enterprise Risk ManagementAM Best uses a holistic approach in the evaluation of an insurer’s overall ERM, with its analysis based on an evaluation of the company’s risk framework and a review of its risk management capabilities relative to its risk profile. The assessment takes into account the scope of operations and the complexity of the business. AM Best believes that an insurer practicing sound ERM and effectively executing its strategy within its stated risk tolerances is more likely to preserve and build its balance sheet and perform successfully over the long term.

Good Understanding of Underwriting Risk, but ERM Framework Lacks SophisticationThree out of seven Jordanian insurers rated by AM Best received ERM assessments of Marginal, while the rest were deemed Appropriate. In AM Best’s opinion, the management of most insurers have a deep understanding of underwriting risk. In general, while they possess a good approach to the identification, quantification and mitigation of key risks relating to underwriting operations, AM Best notes that investment and concentration risks remain areas of weakness.

Central oversight of enterprise-wide risk remains underdeveloped and typically more reactive in nature. A number of companies do not have a clearly defined risk appetite statement, with management of risks undertaken with reference to risk tolerances and hard risk management controls that are defined, articulated and imposed at a business unit level (such as through underwriting, investment, claims, and reinsurance).

As previously noted, concentration remains a major risk for Jordanian AM Best-rated insurers given that most of their business, as well as their investment operations, emanate solely from Jordan and leaves them heavily exposed to country risk. Jordan is considered to have high levels of economic, political and financial system risk as classified by AM Best.

Most of the ERM frameworks of AM Best-rated Jordanian insurers are Emerging. However, certain key elements of the framework are not yet in place or have proven to be inadequate for the complexity of their operations, with stress testing the most underdeveloped component of the ERM assessment (see Exhibit 12). Given the weakened balance sheets and limited capital management tools in place for most insurers, stress testing is a significant concern in AM Best’s opinion. The sensitivity of a company’s capital position to underwriting and investment shocks can

5

1

5

4 4

1

3

1

2 2

0

2

0 0 0

Risk Appetite andTolerance

Stress Testing Risk Identificationand Reporting

RiskManagement and

Controls

Governance andRisk Culture

By N

umbe

r of C

ompa

nies

Emerging Nascent Unrecognized

Exhibit 12AM Best-Rated Jordan Insurers – Enterprise Risk Management – Framework Evaluation

Notes: Jordan International is not included because of a change in methodologySource: AM Best data and research

11


be significant. AM Best recognises that the modelling of catastrophe risks is unsophisticated in the region and typically provided by international reinsurers.

ConclusionAM Best’s analysis has highlighted some common themes as weaknesses, the most important of which is risk governance, with companies adopting basic or minimum requirements to run their businesses. The buffers that most insurers had in their risk-adjusted capitalisation have eroded steadily in recent years. Asset concentrations in high-risk investments remain a concern and add significant volatility to operating performance and capital adequacy, while in some cases, insurers have fallen below local solvency requirements. In conclusion, AM Best believes that the adoption of prudent risk management practices is critical to ensure that companies manage their risks effectively and in a controlled manner.

Exhibit 13Rated Jordan Insurers – AM Best Ratings and Outlooks, as at May 2, 2019

AMB # Company Name

Best's Long-Term Issuer

Credit Rating (ICR)

Best's Financial Strength

Rating (FSR)

Best's ICR and FSR Action

Best's ICR/FSR Outlook

Rating Effective

Date78183 Arab Orient Insurance Company bbb B++ Affirmed Negative 6-Jul-1891740 Arabia Insurance Company – Jordan bbb- B+ Affirmed Negative 23-May-1891584 First Insurance Company bbb B++ Affirmed Positive1 12-Dec-1892479 Jordan French Insurance Company Ltd bb+ B Affirmed Positive 1-Mar-1988866 Jordan Insurance Company Plc bb+ B Downgraded Negative2 7-Feb-1978963 Jordan International Insurance Company bbb- B+ Affirmed Negative 1-Nov-1889837 Middle East Insurance Company Plc bbb- B+ Affirmed Stable 30-Nov-18

Notes:1 ICR Positive FSR Stable2 ICR Negative FSR Stable


Exhibit 14Rated Jordan Insurers – Best's Capital Adequacy Scores

Enterprise Balance Operating Business Risk Lift /

AMB# Company Name 95 99 99.5 99.6 Strength Performance Profile Management Drag078183 Arab Orient Insurance

Company66 52 46 45 Strong Adequate Neutral Marginal Lift

091740 ARABIA Insurance Company – Jordan

36 17 9 6 Strong Adequate Limited Appropriate Lift

091584 First Insurance Co (CS) 77 68 65 64 Very Strong Adequate Limited Appropriate Lift

092479 Jordan French Insurance Company Ltd

50 32 26 24 Strong Adequate Limited Marginal -

088866 Jordan Insurance Company Plc

36 19 13 11 Strong Adequate Neutral Marginal -

078963 Jordan International Insurance Company

57 47 43 42 Very Strong Adequate Limited Appropriate -

089837 Middle East Insurance Company Plc

48 26 17 14 Strong Strong Limited Appropriate -


Best's Capital Adequacy Ratio

(VaR %)


SPECIAL REPORT

Published by AM Best

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Best’s Financial Strength Rating (FSR): an independent opinion of an insurer’s financial strength and ability to meet its ongoing insurance policy and contract obligations. An FSR is not assigned to specific insurance policies or contracts.

Best’s Issuer Credit Rating (ICR): an independent opinion of an entity’s ability to meet its ongoing financial obligations and can be issued on either a long- or short-term basis.

Best’s Issue Credit Rating (IR): an independent opinion of credit quality assigned to issues that gauges the ability to meet the terms of the obligation and can be issued on a long- or short-term basis (obligations with original maturities generally less than one year).

Rating Disclosure: Use and LimitationsA Best’s Credit Rating (BCR) is a forward-looking independent and objective opinion regarding an insurer’s, issuer’s or financial obligation’s relative creditworthiness. The opinion represents a comprehensive analysis consisting of a quantitative and qualitative evaluation of balance sheet strength, operating performance, business profile, and enterprise risk management or, where appropriate, the specific nature and details of a security. Because a BCR is a forward-looking opinion as of the date it is released, it cannot be considered as a fact or guarantee of future credit quality and therefore cannot be described as accurate or inaccurate. A BCR is a relative measure of risk that implies credit quality and is assigned using a scale with a defined population of categories and notches. Entities or obligations assigned the same BCR symbol developed using the same scale, should not be viewed as completely identical in terms of credit quality. Alternatively, they are alike in category (or notches within a category), but given there is a prescribed progression of categories (and notches) used in assigning the ratings of a much larger population of entities or obligations, the categories (notches) cannot mirror the precise subtleties of risk that are inherent within similarly rated entities or obligations. While a BCR reflects the opinion of A.M. Best Rating Services, Inc. (AM Best) of relative creditworthiness, it is not an indicator or predictor of defined impairment or default probability with respect to any specific insurer, issuer or financial obligation. A BCR is not investment advice, nor should it be construed as a consulting or advisory service, as such; it is not intended to be utilized as a recommendation to purchase, hold or terminate any insurance policy, contract, security or any other financial obligation, nor does it address the suitability of any particular policy or contract for a specific purpose or purchaser. Users of a BCR should not rely on it in making any investment decision; however, if used, the BCR must be considered as only one factor. Users must make their own evaluation of each investment decision. A BCR opinion is provided on an “as is” basis without any expressed or implied warranty. In addition, a BCR may be changed, suspended or withdrawn at any time for any reason at the sole discretion of AM Best.

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special report: jordan insurance ratings: benchmarking

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